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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from __________to __________
Commission file number 0-11402
TELXON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 74-1666060
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
3330 West Market Street, Akron, Ohio 44333
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 867-3700
Securities registered pursuant Name of each exchange
to Section 12(b) of the Act: on which registered:
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of class)
7-1/2% Convertible Subordinated Debentures Due 2012
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ]. No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ].
The aggregate market value of registrant s Common Stock held by non-affiliates
as of May 31, 1994, based on the last reported sales price of the Common Stock
as reported on NASDAQ/NMS for such date, was $183,309,268.
At May 31, 1994, there were 15,412,566 outstanding shares of the registrant's
Common Stock.
Documents Incorporated by Reference
The registrant's definitive proxy statement for its 1994 Annual Meeting of
Stockholders to be held on August 19, 1994, which the registrant intends to
file with the Securities and Exchange Commission within 120 days of the close
of its fiscal year ended March 31, 1994, is incorporated by reference in Part
III of this Annual Report on Form 10-K from the date of filing such
document. Page 1 of _____ Pages
Exhibit Index Appears on Page __63
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PART I
ITEM 1. BUSINESS
GENERAL
Description of Company's Business
Telxon Corporation ("Telxon" or the "Company") designs, develops, manufactures,
integrates, markets, and sells portable, batch and wireless, tele-transaction
computers and systems. Telxon integrates its portable tele-transaction
computers ("PTCs") with wired and wireless Local Area Networks ("LAN") and
links these networks to customers' specific enterprise networks.
Products, systems and services are marketed through a global sales and
technical services operation to the retail, industrial, transportation,
logistics, insurance, financial, healthcare and other vertical markets.
Historical Overview
The Company was incorporated in 1969 in Delaware as "Electronic Laboratories,
Inc.", as the successor to a business established in Texas in 1967. The
Company's name was changed to "Telxon Corporation" in 1974.
Telxon completed its initial public offering of 1,600,000 shares in July 1983,
a secondary offering of 1,150,000 shares in July 1985, and in June 1987, a $46
million 7-1/2% Convertible Subordinated Debenture due 2012. The Company
re-purchased $21.3 million of the debentures as of March 31, 1994.
Since the early 1970s, Telxon has developed and marketed portable handheld
terminals to retailers and wholesalers in the grocery, drug and hardware
industries. These terminals were used for order entry and inventory
applications. Demand for handheld devices expanded as bar code identification
systems were adopted by these and other industries, and as the need for timely,
accurate information became more important to reducing costs, improving
productivity and enhancing customer service. As new generations of products and
applications evolved, Telxon became a leading provider of PTCs and PTC wireless
networks to these three major retail and wholesale industries.
Commercial demand over the past five years has been driving the use of portable
and wireless tele-transaction computers and systems to other retail industries
including mass merchandisers, department stores and specialty store chains.
Telxon systems are also being used and/or evaluated in a wide variety of other
industries, including manufacturing, transportation, logistics, healthcare,
finance, insurance, and mobile field repair.
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Three Year Strategic Plan Effective April 1, 1993.
During the first quarter of fiscal 1994, management initiated a three-year
strategic plan to position the Company for expanding its current markets and
penetrating new markets through a revitalized global sales organization, new
vertical systems groups and new products and technology.
This plan incorporates five basic elements:
I. Global Sales, Marketing and Technical Service Operation
II. Vertical Systems Group
III. Technical Subsidiaries Group
IV. Advanced Research and Product Development
V. Telxon Manufacturing and Product Maintenance
These five elements are designed to drive the Company's sales and profits while
general and administration functions are available as shared resources.
I. GLOBAL SALES, MARKETING AND TECHNICAL SERVICES
Global Sales, Marketing and Technical Services includes three divisions:
- - North American Division
The North American Division is responsible for the sales and profits
of all Telxon products, systems and services in the United States and
Canada. In fiscal 1994, North American sales increased 29%, and 89%
in the fourth quarter of fiscal 1994 compared to the same period in
the prior year. The North American Division sells direct through its
own sales force as well as through selected value added resellers
("VARs"), system integrators, original equipment manufacturers
("OEMs") and strategic partners.
Wal-Mart Stores, Inc., Telxon's largest customer, accounted for 11% of
total revenues in fiscal 1994. No other customer accounted for 10% or
more of the Company's total revenues in fiscal 1994.
- - International Division
The International Division is responsible for the sales and profits of
all Telxon products, systems and services outside of the United States
and Canada. In fiscal 1994, International Division sales increased
11%, and 50% in the fourth quarter of fiscal 1994 compared to the same
period in the prior year. The International Division sells direct
through its own sales force as well as through selected distributors,
VARs, system integrators, OEMs and strategic partners.
The International Division subsidiaries are located in Australia,
Belgium, France, Germany, Italy, Japan, Spain, and the United Kingdom,
and through distributors in Africa, Asia, Europe, Mexico, the Middle
East and South America. Distributor support offices are located in
Belgium, Brazil, and Singapore. (For more information regarding
geographical segments and revenues from the Company's International
Division, see Note 12 to the consolidated financial statements and
Item 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.").
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- -- Global Technical Services Division
The Global Technical Services Division is responsible for developing
and integrating PTC products, application systems, wireless PTC
networks and system integration services for the North American and
International Divisions.
The Global Technical Services Division provides customer specific
products and solutions, which integrate the Company's Gateway
Connectivity System(TM) ("GCS(TM)") technology with PTCs and the
customer's host interface. This Division performs site surveys,
utilizes protocol software for host connectivity, and implements user
applications.
II. VERTICAL SYSTEMS GROUP
The Vertical Systems Group ("VSG"), composed of five industry-specific
marketing groups, partners with Telxon's Global Sales, Marketing and Technical
Services, VARs and system integrators to provide industry specific solutions
for customers in each vertical industry.
- - The Retail Technology Group
The Retail Technology Group ("RTG") was formed in January 1993 to
focus on serving customers in the retail industry. RTG serves the
needs of department store, grocery, mass merchandiser, drug store,
hardware and specialty chains.
Traditionally, Telxon's market focus has been on the retail industry.
From its original base of batch, hand-held terminals (for order entry
and inventory), Telxon has become a leading provider of in-store
portable automation systems linking the Company's PTCs with in-store
processors and point-of-sale ("POS") systems via the Company's
wireless technology. Applications involving real-time communications
include shelf auditing, direct store delivery, and POS transactions.
- - The Industrial Technology Group
The Industrial Technology Group serves the manufacturing, warehousing,
and distribution markets. Telxon's portable industrial systems
consist of handheld or vehicle mounted PTCs which communicate in real
time via spread spectrum and/or narrowband wireless data
communications. A variety of connectivity options enable migration
paths to various host interfaces, such as IBM(R) SNA and Unix(R). The
Industrial Technology Group's systems support the following
applications: shipping, receiving, inventory management, work order
processing, and quality control.
- Gateway Connectivity System and GCS are trademarks of Telxon
Corporation.
- IBM is a registered trademark of International Business
Machines, Inc.
- UNIX is a registered trademark of Unix Systems Laboratories,
Inc.
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- - The Logistics and Transportation Technology Group
The Logistics and Transportation Technology Group markets the
Company's PTC and wireless network solutions to the materials
management and transport industry. Industry segments include
warehousing and logistics, air passenger, air cargo, couriers, motor
carriers, railroads, and water carriers.
The Company integrates its handheld, pen-based, cradle, and wireless
LANs and Wide Area Network ("WAN") technologies to automate
applications including package tracking, fleet management, payload
management, inspection, and work order processing.
- - The Healthcare Technology Group
The Healthcare Technology Group serves healthcare institutions, VARs
and integrators which are searching for opportunities to reduce costs
while improving the quality of patient care. The Company integrates
its pen-based PTC technology and wireless communication technology to
enhance hospital information networks and home healthcare data
transfers. Existing hospital software and computer systems can be
linked to Telxon PTCs. The Healthcare Technology Group targets
hospital and home healthcare clinicians to use their systems for
admitting, billing, charting, electronic patient record updating, and
point-of-care services.
- - The Insurance and Financial Services Group
The Insurance and Financial Services Group was recently formed to
provide the Company's pen-based and wireless communications solutions
for insurance and financial service firms. The Company's pen-based
and Wide Area Radio Network ("WARN") radio systems solutions currently
target insurance applications including premium audit inspection,
property valuation, and insurance claims management.
The Company's primary market segment has long been the retail industry, which
represents over 55% of current revenues. The Company's future growth will
depend in part on the ability of VSG to successfully penetrate new markets.
III. THE TECHNICAL SUBSIDIARIES GROUP
In the third quarter of fiscal 1993, the Company began a program to accelerate
advanced research, technology and product development by forming or purchasing
new product and technology companies that were driven through entrepreneurial
innovation and leadership. The Company also increased its investment in its
own research and product development operations. The following products and
technologies were identified to meet the Company's goals through this program:
- Ruggedized wide area radio PTCs
- Wireless pen-based workslates
- Advanced character recognition software
- Advanced 2D bar code encoding and autodiscriminating decode
software
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- Advanced 902 MHz and 2.4 GHz spread spectrum radios and
wireless networks
- Advanced CPU and ASIC design
- Advanced speech recognition
The Technical Subsidiaries Groups have been structured to work together with
the shared corporate resources of the Advanced Research and Product Development
Group to design, develop and produce leading-edge technology products for the
future. The companies acquired or formed through this program are detailed
below.
Itronix(R) Corporation
In March 1993, the Company acquired Itronix Corporation ("Itronix") of Spokane,
Washington. Itronix designs, develops, manufactures, and markets ruggedized,
portable microcomputers designed for mobile, telecommunications workers and
field service technicians.
Itronix products are environmentally sealed, protecting them against the
effects of water, shock, temperature extremes, dust, and rough handling. WARN
technology is integrated with the ruggedized, mobile terminals to provide data
transfer over long distances and open spaces via third party WANS.
PenRight! Corporation
In February 1994, the Company acquired PenRight! Corporation ("PenRight!") of
Fremont, California. PenRight! is a leading developer of pen-based character
recognition software. PenRight!'s Pro(R) software acts as a DOS based software
development tool which can be utilized to create pen-based applications in
Microsoft "C." PenRight!'s Pro(R) software supports ten international
languages. The Company is developing a new version to support 486 platforms
and Pen for Windows(R).
Teletransaction(TM), Inc.
In February 1993, the Company acquired Teletransaction, Inc.
("Teletransaction") of Akron, Ohio. Teletransaction is a developer of advanced
pen and touch-screen, wireless, mobile workslates for vertical markets,
including:
- Retail
- Industrial
- Logistics and transportation
- Healthcare
- Insurance and financial services
- - Itronix is a registered trademark of Itronix Corporation.
- - PenRight! Pro is a registered trademark of PenRight! Corporation.
- - Pen for Windows is a registered trademark of Microsoft Corporation.
- - Teletransaction is a trademark of Teletransaction, Inc.
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Metanetics Corporation
Metanetics Corporation ("Metanetics(TM)") was formed in January 1994 in Fort
Myers, Florida, in part from the acquisition of Metamedia Corporation of Port
Jefferson, New York.
Metanetics develops 2D bar code encoding and autodiscriminating decode
software.
AIRONET Wireless Communications, Inc.
In January 1994, the Company formed AIRONET Wireless Communications, Inc.
("AIRONET(TM)") of Akron, Ohio to continue development and marketing of
wireless LAN and WAN systems. AIRONET was formed from one subsidiary company
and two units of the Company:
- - Telesystems SLW, Inc. -- a designer and manufacturer of wireless
spread spectrum LAN radios that was purchased by Telxon in 1992.
- - Telxon's Radio and Wireless Network Engineering Group -- designers of
advanced spread spectrum technology radios and network software.
- - Telxon's RF Software Engineering Group -- advanced software designers
of universal wireless connectivity systems for integration to other
computer manufacturers' networks.
AIRONET developed one of the first commercial applications for spread spectrum
radio technology and currently designs and develops universal modular LAN and
WAN radio products and networks which it sells to Telxon, VARs and OEMs. In
addition, AIRONET acquired the FieldNet(R) product line, which simplifies the
development and deployment of PC, PTC or workslate applications incorporating
WARN connectivity.
Telxon's future growth will depend in part on the success of the Worldwide
Sales, Marketing and Technical Services Group, Vertical Systems Group and
Technical Subsidiaries Group.
IV. ADVANCED RESEARCH AND PRODUCT DEVELOPMENT
The Company's advanced research focuses on advanced hardware, software, and
firmware designs that utilize Telxon proprietary ASIC (Application Specific
Integrated Circuits) chips. The Company's product development strategy is to
enhance the functionality and improve the price and performance of its hardware
and software, and to improve the packaging of its PTC systems to address the
specific requirements of target market areas. Products and systems are
designed for modularity and the ability to upgrade, where possible.
- - Metanetics is a trademark of Metanetics Corporation.
- - AIRONET is a trademark of AIRONET Wireless Communications, Inc.
- - FieldNet is a registered trademark of AIRONET Wireless Communications,
Inc.
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During fiscal 1994, 1993, and 1992, the Company spent approximately $29.1
million, $17.8 million and $12.1 million, respectively, for Company-sponsored
research, development and engineering. For further discussion, see
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION - Operating Expenses."
V. TELXON MANUFACTURING AND PRODUCT MAINTENANCE
- Manufacturing Operations
Manufacturing operations consist of assembling, testing and the quality
assurance of components, sub-assemblies and finished products. The
Company's products are built and configured to customer specifications
for various memory sizes, packaging, peripherals, keyboards and
displays.
In May 1994, Manufacturing Operations were consolidated into a newly
constructed 116,000 square foot facility. The facility provides a more
efficient plant layout and an opportunity for expansion of manufacturing
capacity in the future.
All component parts in the Company's products are purchased from
outside sources. All packaging, custom-integrated circuits, keyboards
and printed circuit boards are produced to the Company's specifications.
A number of peripheral products, including wands, laser scanners,
controllers and receivers, are purchased as completed assemblies and
attached to and staged with the Telxon products before delivery. Some
products are produced by outside contract manufacturers.
In fiscal 1994, Telxon's International Procurement Office ("IPO") in
Singapore completed its third year of operation, presenting the Company
with an overall cost reduction in material procured in the Far East,
inclusive of incremental freight and tariffs. As more commodities are
procured by the IPO staff, continued cost savings are expected.
- Product Maintenance Operations
The Company provides maintenance and repair services for Telxon
customers from its recently constructed National Service Center in
Houston, Texas. The Company also services various third party products,
including personal computers, printers and communication devices.
The Company also maintains a number of customer specific service depots
to provide service to users with large concentrations of Telxon
products. The Company offers a broad array of repair services and
maintenance agreements ranging from time and material charges to
sophisticated plans, such as the "just in time" program that offers
spare Telxon equipment supplied on site to the customer, virtually
eliminating any system downtime.
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PRODUCTS AND SYSTEMS
Handheld PTCs
The Company has developed a line of handheld PTCs, which range from low-end
batch terminals to highly integrated PTCs using laser bar code readers and
spread spectrum radios. The current products in this group include: Telxon PTC
600, 610, 710, 860, 910, 912, 921, 960 and Itronix 3400.
Workslate and Other PTC Products
The Company has developed a line of pen-based and touch-screen workslate PTCs
through Teletransaction. These products include the PTC 1140 and PTC 1180.
The Telxon PTC 860IM fork lift truck mount, the POS-5000 portable point-of-sale
terminal, the AMT-925 arm mounted terminal, and the Itronix T-5000 are also
included in this group.
Wireless Products, Network Systems and Software
Through AIRONET, the Company has developed a series of spread spectrum data
radios, repeaters, routers and bridges. The current products use the 902 MHz
or 2.4 GHz frequency bands at data rates ranging from 232Kbps up to 2Mbps.
These radio products are integrated with Telxon's Microcellular Architecture
("TMA") software to create wireless LANs, or with FieldNet wireless network
software to build universal wireless networks that incorporate WARN
connections.
Telxon's universal wireless networks interface seamlessly with other
manufacturers' communication networks.
The Company also makes a line of base station and client/server card
transceivers through its GCS series that interface portable wireless products
with a client/server or mainframe. These products include the GCS 1000 and
2000.
Wireless Data Communications
Telxon provides wireless data communication products for mobile, distributed
data processing application systems. The Company uses industry standard "open"
system protocols to provide connectivity across a wide range of host computer
systems including SNA and TCP/IP.
The Company offers customers optional built-in acoustic couplers or integrated
modems that allow data transmission from remote telecommunication locations
into a host computer and client servers.
The Company's PTCs can be equipped with radios to transfer programs or data to
and from other computers or peripheral devices while remaining mobile. The
four types of available radio are (1) spread spectrum, (2) wide area, (3)
micro radios, and (4) narrow band FM radios.
Telxon's DataSpan 2000 System(TM) provides 902MHz and 2.4GHz spread spectrum
radio technology for fast, robust wireless data communications. Spread
spectrum technology and the Company's GCS are used to create a wireless
interface between Telxon PTCs and the
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customers' host computers. The Company's spread spectrum radios are designed
to fit into Telxon's PTCs and a variety of personal computers (PCs) and client
servers.
Mobile, wireless communication is provided using Telxon's Microcellular
Architecture ("TMA"). The DataSpan 2000 System has one or more radio cells
which support an area of coverage. The TMA system allows PTCs to move from
cell to cell while maintaining a wireless connection to the host computer. The
system can be expanded to provide more cells and greater coverage to over 4
million square feet.
The Company has been granted a number of patents for its spread spectrum
technology and was the first company in the wireless industry to receive the
United States' FCC and Canada's Department of Communication approval for its
spread spectrum radios.
The Company markets the wireless LAN product line worldwide through AIRONET.
The Company announced a wireless network communication development alliance
with IBM's AS/400 Division in May 1994. The alliance advances the joint
development, marketing, and sales of technology, products, and solutions by the
two companies.
Through Itronix and Teletransaction, third party wide area network radios are
integrated with PTCs via the ARDIS(R) or RAM(R) mobile data networks.
Accessing the ARDIS or RAM wireless wide area packet data networks is
accomplished by integrating third party radio modem boards into the Company's
PTCs.
"Micro radios" are small, low-power FM radios designed and manufactured by the
Company and integrated into Telxon PTCs and peripherals to provide cable-free
data communications between system components.
Narrow band FM radios from major manufacturers have been provided by Telxon
since 1984. These radios operate in the 450 Mhz band and require site
licensing.
Peripherals
The Company integrates a variety of peripheral products into or with its
regular product line. They include: laser bar code readers (internal and
external), modular printers (24, 40 and 80 columns), chargers, cradles, modems,
and RS232 interfaces. Many of these products or components of products are
purchased from outside vendors.
Software Products
The Company develops, through its subsidiaries, PenRight! and Metanetics,
advanced character recognition software and advanced 2D bar code encoding and
autodiscriminating decode software.
- ----------------------
- - DATASPAN 2000 is a trademark of Telxon Corporation.
- - ARDIS is a registered trademark of IBM Corporation and Motorola
Corporation.
- - RAM is a registered trademark of RAM Mobile Data, Inc.
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Software Operating Systems, Languages and Applications
Telxon continues to invest in the research and development of operating
systems, software development tools, connectivity and ASIC microchips.
The Company continues to refine its proprietary PTC operating system TCOS(TM)
(Telxon Common Operating System) and TCAL(R) (Telxon Common Application
Language) to provide advanced application development programs in DOS, C and
other user friendly operating systems.
In 1989 Telxon introduced RAMsaver(TM), an improved Microsoft(R) MS-DOS version
3.21, to enhance conservation of battery power, support bar code readers,
minimize use of Random Access Memory (RAM) and permit the operating system and
application programs to run from Read Only Memory (ROM). RAMsaver expands the
flexibility of Telxon PTCs and offers new application opportunities by making
the Company's PTCs readily accessible to PC software developers using familiar
application development tools and languages, such as Microsoft "C",
GW-BASIC(R), Pascal, Fortran, Assembler (MASM(R)) and Borland Turbo C(R).
Telxon's recent release of MS-DOS version 5.0 is the Company's fourth release
of MS-DOS.
The new pen-based and touch-screen workslates offer application development
capabilities in DOS, Pen for Windows and C.
INTELLECTUAL PROPERTY
The Company regards certain of its hardware and software products as
proprietary and relies on a combination of United States and foreign patent,
copyright, trademark and trade secret laws and license and other contractual
confidentiality provisions to protect its proprietary rights. In addition, the
Company's products also utilize hardware and software technologies licensed
from third parties. Given the rapidity of industry technological change,
however, the competence and creative ability of the Company's development,
engineering, programming, marketing and service personnel may be as or more
important to its competitive position as the legal protections and rights
afforded by patent and other owned or licensed intellectual property rights.
BACKLOG
Backlog at any particular date is dependent on timing of receipt of orders and,
therefore, is not a reliable indicator of future sales over an extended period
of time. The Company operates with a sales forecasting and manufacturing build
plan which provides a more reliable indicator to management of short and
long-term sales
- -----------------------
- - TCOS is a trademark, and TCAL is a registered trademark, of Telxon
Corporation.
- - MS-DOS is a registered trademark of Microsoft Corporation.
- - RAMsaver is a trademark of Telxon Corporation.
- - GW-BASIC and MASM are registered trademarks of Microsoft Corporation.
- - Turbo C is a registered trademark of Borland International, Inc.
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COMPETITION
The computer industry, of which portable tele-transaction systems are a part,
is highly competitive and characterized by advances in technology which
frequently result in the introduction of new products with improved performance
characteristics. Failure to keep pace with product and technological advances
could negatively affect the Company's competitive position and prospects
for growth.
The Company competes directly and indirectly with a number of companies in its
market segments. Frequent competitors include Symbol Technologies, Inc.,
Bohemia, New York and Norand Corporation, Cedar Rapids, Iowa. In addition,
companies that are participants in the broader computer industry are potential
competitors. Some of the Company's competitors and potential competitors have
substantially greater financial, technical, intellectual property, marketing
and human resources than the Company.
EMPLOYEES
As of May 31, 1994, the Company employed approximately 1650 people. The Company
has never experienced a work stoppage due to labor difficulties and believes
that relations with its employees are good.
ITEM 2. PROPERTIES
The Company's corporate and engineering offices are located in Akron, Ohio, in
a 100,000 square foot office building constructed in 1979. Such offices are
occupied by the Company pursuant to a lease expiring December 31, 2001. The
lease provides the Company with the option, exercisable on September 1, 2001,
to purchase the office building and the land on which it is situated for its
then current fair market value.
The Company owns a 32,500 square foot one-story facility approximately one mile
from its corporate offices which houses its Customer Support Center, the
Training and Technical Publications Group and the New Product Support
Department.
In addition, the Company leases approximately 29,500 square feet of office
space pursuant to a lease expiring on March 31, 1997. This space is located
less than one mile from the Company's corporate offices and houses its AIRONET
and PenRight! subsidiaries, as well as its Systems Integration Department.
The Company owns two buildings in Houston, Texas of concrete construction,
located on a 15 acre site. The first building is a 116,000 square foot
manufacturing facility that was completed in April 1994. This building houses
all manufacturing and warehousing operations for the Company, as well as
administrative and manufacturing engineering offices. The second building is
36,000 square feet and houses the Company's National Service Center. This
building was completed in November 1993.
The Company's Itronix subsidiary is located in Spokane, Washington, where it
occupies approximately 22,500 square feet of office space pursuant to a lease
expiring May 31, 1998.
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The Company s Telesystems subsidiary is located in Markham, Ontario, Canada,
where it occupies approximately 9,600 square feet of office and manufacturing
space pursuant to a lease expiring November 30, 1998.
In addition to these principal locations, the Company maintains 49 locations in
the United States, Canada, Western Europe, Australia, Japan and Southeast Asia
which are used principally for sales and customer service offices, as well as
for executive and engineering offices for certain of its domestic and its
international subsidiaries. These locations are generally leased for terms
which range from one to three years. The Company believes that its existing
and planned facilities will be adequate for its reasonably foreseeable level of
operations.
ITEM 3. LEGAL PROCEEDINGS
In December 1992, four class action suits were filed in the United States
District Court, Northern District of Ohio, by certain alleged stockholders of
the Company on behalf of themselves and purported classes consisting of Telxon
stockholders, other than defendants and their affiliates, who purchased the
Company's common stock between May 20, 1992 and January 19, 1993. The named
defendants are the Company, former President and Chief Executive Officer
Raymond D. Meyo, and current President, Chief Operating Officer and Chief
Financial Officer Dan R. Wipff. On February 1, 1993, the Plaintiffs filed
their Amended and Consolidated Class Action Complaint related to the four
actions, alleging claims for fraud on the market and negligent
misrepresentation, arising from alleged misrepresentations and omissions with
respect to the Company's financial performance and prospects, and alleged
trading activities of the named individual defendants. The Amended Complaint
seeks certification of the purported class, unspecified compensatory damages,
the imposition of a constructive trust on certain of the defendants' assets and
other unspecified extraordinary equitable and/or injunctive relief, interest,
attorneys' fees and costs. The defendants, including the Company, filed a
Motion to Dismiss which was denied by the court on June 3, 1993. On April 16,
1993, Plaintiffs filed their Motion for Class Certification. The defendants,
including the Company, filed their briefs in opposition to Class Certification
on October 13, 1993. On December 17, 1993, the District Court certified the
class, consisting of Telxon stockholders, other than defendants and their
affiliates, who purchased Telxon common stock between May 20, 1992 and December
14, 1992. The defendants intend to vigorously defend this Consolidated Class
Action.
On September 21, 1993, a derivative Complaint was filed in the Court of
Chancery of the State of Delaware, in and for Newcastle County, by an alleged
stockholder of Telxon derivatively on behalf of Telxon. The named defendants
are the Company; Robert F. Meyerson, Chairman of the Board and Chief Executive
Officer; Dan R. Wipff, President, Chief Operating Officer and Chief Financial
Officer and director; Robert A. Goodman, Corporate Secretary and outside
director; Norton W. Rose, outside director; and Dr. Raj Reddy, outside
director. The Complaint alleges breach of fiduciary duty to the Company
and waste of the
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Company's assets in connection with certain transactions entered into by Telxon
and compensation amounts paid by the Company. The Complaint seeks an
accounting, injunction, rescission, attorneys' fees and costs. On November 12,
1993, Telxon and the individual director defendants filed a Motion to Dismiss.
The plaintiff filed his brief in opposition to the Motion on May 2, 1994. The
defendants intend to file a responsive final brief and to vigorously defend
this action.
In the normal course of its operations, the Company is subject to performance
under contracts, and has various legal actions pending. However, in
management's opinion, any such outstanding matters have been reflected in the
consolidated financial statements, are covered by insurance or would not have a
material adverse effect on the Company's consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended March 31, 1994.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information with respect to each executive
officer of the Company. Executive officers of the Company are annually elected
by the Board of Directors of the Company or are annually appointed by the Chief
Executive Officer and ratified and approved by the Board of Directors.
Robert F. Meyerson, 57, has been Chief Executive Officer of the Company since
October 1992 and Chairman of the Board of Directors since November 1981. Mr.
Meyerson was Chief Executive Officer from August 1978 to May 1985, and was
President from August 1978 until November 1981. He was a director of the
Company since 1977. Mr. Meyerson was Chairman of the Board of Basicomputer
Corporation ("Basicomputer"), a major regional distributor of PC products,
peripherals, services and systems, from January 1984 until it was acquired by
The Future Now, Inc. in September 1993, and Chief Executive Officer of
Accipiter Corporation, a consulting firm, from June 1985 through October 1992.
Dan R. Wipff, 51, has been President and Chief Operating Officer of the Company
since October 1992 and the Company's Chief Financial Officer since December
1991. He was Senior Executive Vice President and Chief Operating Officer from
October 1989 to October 1992. He also served as the Company's Chief Financial
Officer from October 1989 to July 1990 and from October 1990 to September 1991.
Mr. Wipff has been a director of the Company since September 1980 and was also
a director of the Company from April 1974 until September 1979. He was
Executive Vice President of Park Heights Investments, Inc., a consulting
company, during 1989, and President of Sandia Federal Savings & Loan
Association ("Sandia") from 1984 to 1989. On February 10, 1989, the Federal
Home Loan Bank Board appointed the Federal Savings and Loan Insurance
Corporation as conservator of Sandia. On September 14, 1989, the Office of
Thrift Supervision appointed the Resolution Trust Corporation as receiver of
Sandia.
14
<PAGE> 15
Lawrence L. Allman, 51, is the President and Chief Executive Officer of
Itronix, which became a wholly owned subsidiary of the Company in April 1993.
Mr. Allman became the President and Chief Executive Officer of Itronix in 1992.
He was Senior Vice President of Operations and Marketing from 1989 to 1992, and
Vice President of Operations from 1987 to 1989, of Itron, Inc., a manufacturer
and marketer of data collection and interactive field service systems for
utilities and general field service workforce companies.
Frank E. Brick, 45, has been Senior Executive Vice President of the Company
since November 1993. For more than five years prior to joining the Company, he
served as Chief Executive Officer of Basicomputer.
John H. Cribb, 60, has been President, International, of the Company since
January 1993, and was the Company's Senior Vice President of International
Operations from January 1990 to January 1993. Mr. Cribb was a Vice President
of Telxon and Managing Director of Telxon Limited, Telxon's United Kingdom
subsidiary, from 1982 to 1990.
D. Michael Grimes, 54, has been the President and Chief Executive Officer of
AIRONET Wireless Communications, Inc., a wholly owned subsidiary of the
Company, since April 1994. He served as President of RTG from its formation in
January 1993 until April 1994. He previously served the Company as Vice
President, Channels Marketing and Major Accounts, from June 1992 to December
1992, from December 1990 to May 1992 and Senior Vice President, Sales and
Marketing, from September 1989 to December 1990.
William J. Murphy, 60, has been Executive Vice President, North American
Operations, of the Company since January 1993. Mr. Murphy was Area Vice
President, East, of the Company from November 1992 until January 1993, and
served as a District Manager of the Company from September 1989 until November
1992. From May 1989 to August 1989, Mr. Murphy was Area Vice President, North
Eastern Region, of the Company.
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock has been publicly traded since July 21, 1983, in the
over-the-counter market under the symbol TLXN. The following table sets forth,
with respect to the past two fiscal years of the Company, the range of high and
low closing prices as reported in the NASDAQ National Market System and cash
dividends paid. The Company has not paid other than nominal dividends. The
Company intends to follow a policy of retaining earnings in order to finance
the continued growth and development of its business. Payment of dividends is
within the discretion of the Company's Board of Directors and will depend on,
among other factors, earnings, capital requirements and the operating and
financial condition of the Company.
<TABLE>
<CAPTION>
Fiscal Quarter
------------------------------------------------------------------------
Year Ended March 31, First Second Third Fourth Year
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
High . . . . . . . . . . . . $11.00 $12.75 $11.75 $16.63 $16.63
Low . . . . . . . . . . . . . 6.50 9.25 7.63 10.13 6.50
Dividends paid . . . . . . . -- -- -- .01 .01
1993
High . . . . . . . . . . . . $24.50 $23.75 $21.75 $12.50 $24.50
Low . . . . . . . . . . . . . 19.00 19.50 11.50 9.75 9.75
Dividends paid . . . . . . . -- -- -- .01 .01
</TABLE>
As of May 31, 1994, there were approximately 1,645 holders of record of the
Company's Common Stock.
16
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA
Set forth below are selected financial data for the five years ended March 31,
1994, which have been derived from the Company's audited financial statements
for the periods indicated. The selected financial data should be read in
conjunction with the financial statements for the three years ended March 31,
1994, 1993 and 1992 included elsewhere herein. For further details on 1994
results, refer to Item 7 and Note 16 to the Consolidated Financial Statements.
<TABLE>
<CAPTION>
Income Statement Data: Year Ended March 31,
-------------------------------------------------------------
1994 1993 1992 1991 1990
--------- -------- -------- -------- ------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues:
Product $252,341 $197,116 $177,560 $152,656 $115,773
Customer service 43,652 41,298 37,460 31,917 27,664
-------- -------- -------- -------- --------
Total revenues 295,993 238,414 215,020 184,573 143,437
Costs and expenses:
Cost of revenues 175,305 153,467 114,834 96,618 92,687
Selling expenses 59,894 46,393 42,564 35,823 41,370
Product development and
engineering expenses 29,058 17,798 12,131 11,571 10,337
General and administrative
expenses 31,854 36,113 21,249 22,280 19,657
Loss on sale of operating division -- -- -- -- 4,577
-------- -------- -------- -------- --------
Total costs and expenses 296,111 253,771 190,778 166,292 168,628
-------- -------- -------- -------- --------
Income (loss) from operations (118) (15,357) 24,242 18,281 (25,191)
Interest income 653 1,947 2,998 4,149 3,937
Interest expense (2,459) (2,271) (2,203) (2,560) (3,914)
-------- -------- -------- -------- --------
Income (loss) before income
taxes, extraordinary items
and cumulative effect of an
accounting change (1,924) (15,681) 25,037 19,870 (25,168)
Provision (benefit) for income taxes 875 (4,056) 9,139 7,533 (10,728)
-------- -------- -------- -------- ---------
Income (loss) before extra-
ordinary items and cumulative
effect of an accounting change (2,799) (11,625) 15,898 12,337 (14,440)
Extraordinary items:
Income tax effect of net operat-
ing loss carryover utilized -- -- 1,091 620 --
Gain from early extinguishment
of debt, net of taxes -- -- -- 4,045 --
-------- -------- -------- -------- --------
Income (loss) before cumulative
effect of an accounting change (2,799) (11,625) 16,989 17,002 (14,440)
Cumulative effect of a change in
accounting for income taxes -- (439) -- -- --
-------- -------- -------- -------- --------
Net income (loss) $ (2,799) $(12,064) $ 16,989 $ 17,002 $(14,440)
======== ========= ========= ======== ========
Earnings per common and common
equivalent share:
Income (loss) before extra-
ordinary items and cumulative
effect of an accounting change $ (.18) $ (.79) $ 1.13 $ .91 $(1.09)
Income tax effect of net oper-
ating loss carryover utilized -- -- .08 .05 --
Gain from early extinguishment
of debt, net of taxes -- -- -- .30 --
------- -------- ------- ------- ------
Income (loss) per share
before cumulative effect of
an accounting change $ (.18) $ (.79) $ 1.21 $ 1.26 $ (1.09)
Cumulative effect of a change in
accounting for income taxes -- (.03) -- -- --
------ --------- ------- ------- -------
Net Income (loss) per share $ (.18) $ (.82) $ 1.21 $ 1.26 $ (1.09)
======== ======== ======= ======== =======
Average number of common and common
equivalent shares outstanding 15,425 14,696 14,067 13,510 13,224
Cash dividends $ .01 $ .01 $ .01 $ .01 $ .01
</TABLE>
17
<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA (Continued)
Balance Sheet Data:
<TABLE>
<CAPTION>
March 31,
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
------- ------ -------- -------- ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets $259,968 $212,621 $199,162 $166,588 $166,819
Notes payable, capital lease
and other obligations due
within one year 25,207 679 867 888 631
Total long-term debt and
capital lease obligations 27,534 24,930 25,556 26,009 36,466
Working capital 80,066 84,738 117,216 102,029 96,060
Stockholders' equity 124,715 128,219 124,398 102,163 83,434
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
SUMMARY
The following table sets forth for the periods indicated (i) certain expense
and income items expressed as a percentage of total revenues, and (ii) the
percentage increase or decrease of such items as compared to the corresponding
prior period.
<TABLE>
<CAPTION>
Period to Period
Percentage of Total Revenues Increase (Decrease)
---------------------------- -------------------
1994 1993
Year ended March 31, Compared Compared
1994 1993 1992 to 1993 to 1992
------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Product revenues 85.3% 82.7% 82.6% 28.0% 11.0%
Customer service 14.7 17.3 17.4 5.7 10.2
----- ----- -----
Total revenues 100.0 100.0 100.0 24.2 10.9
Cost of revenues 59.2 64.3 53.4 14.2 33.6
Selling expenses 20.2 19.5 19.8 29.1 9.0
Product development and
engineering expenses 9.8 7.5 5.6 63.3 46.7
General and administrative
expenses 10.8 15.1 9.9 (11.8) 70.0
----- ----- -----
100.0 106.4 88.7 16.7 33.0
----- ----- -----
Income (loss) from
operations -- (6.4) 11.3 (99.2) (163.3)
Interest income .2 .8 1.4 (66.5) (35.1)
Interest expense (.8) (1.0) (1.0) 8.3 3.1
----- ----- -----
Income (loss) before
income taxes, extra-
ordinary items and
cumulative effect of
an accounting change (.6) (6.6) 11.7 (87.7) (162.6)
Provision (benefit) for
income taxes .3 (1.7) 4.3 (121.6) (144.4)
----- ----- -----
Income (loss) before
extraordinary items
and cumulative effect
of an accounting change (.9) (4.9) 7.4 (75.9) (173.1)
Extraordinary items:
Income tax effect of net
operating loss carry-
over utilized -- -- .5 -- (100.0)
Gain from early extin-
guishment of debt,
net of taxes -- -- -- -- --
----- ----- -----
Income (loss) be-
fore cumulative
effect of an
accounting change (.9) (4.9) 7.9 (75.9) (168.4)
Cumulative effect of a
change in accounting
for income taxes -- (.2) -- (100.0) 100.0
----- ----- ----
Net income (loss) (.9)% (5.1)% 7.9% (76.8)% (171.0)%
===== ===== ====
</TABLE>
18
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (Continued)
RESULTS OF OPERATIONS
Overview
The Company's financial performance during fiscal 1994 reflects a continuation
of the corporate re-engineering program started in fiscal 1993 to reposition
the Company for long-term growth in the marketplace of the future.
Several of the Company's goals set forth in its Strategic Plan a year ago have
been achieved during fiscal 1994. The North American Sales Division has been
reorganized with improved revenues as a direct result. In addition, the
Vertical Systems Group ("VSG"), composed of five industry-specific marketing
groups, was established in the third quarter of fiscal 1994. VSG provides
specific solutions to customers in targeted industries including retail,
manufacturing, logistics and transportation, healthcare and insurance and
financial services.
Revenues continued to increase during fiscal 1994 as a result of the
implementation of the first phase of the Strategic Plan achieving record
levels in both the third and fourth quarters. Even more important than the
revenue increase is the return to an operating profit during the third quarter
of fiscal 1994, the first operating profit in five quarters. This return to
operating profitability continued through the fourth quarter of fiscal 1994.
Additionally, the Company has completed the consolidation of its U.S. customer
service operations into a single National Service Center in order to speed
service delivery, increase quality and reduce costs through shared
manufacturing and customer service inventories. By the end of fiscal 1994, the
Company also substantially completed its new manufacturing facility located
adjacent to the National Service Center. The move to the new manufacturing
facility occurred in May, 1994. This facility, with its expanded capacity and
smoothed production flow, should serve the Company's needs for the foreseeable
future.
The successes mentioned above have not occurred without some investments. The
Company's inventories increased during fiscal 1994 due to the long lead-time
procurement for pen-based product offerings and increased safety stock levels
procured in anticipation of the manufacturing operations move to new
facilities. Inventory levels are expected to decline in fiscal 1995 as the
changeover to the new manufacturing facilities is completed.
Revenues
1994 vs. 1993
Consolidated revenues for fiscal 1994 increased $57.6 million or 24% as
compared to fiscal 1993. The Company's largest customer in fiscal 1994,
Wal-Mart Stores, Inc., accounted for approximately 11% of total revenues.
19
<PAGE> 20
Product revenues for fiscal 1994 increased $55.2 million or 28% as
compared to fiscal 1993. Product revenues include the sale of Portable
Tele-transaction Computer ("PTC") units, pen-based and touch-screen workslates,
hardware accessories, customer application software and software license fees.
The product revenue increase was due to a 16% increase in PTC unit volume and a
10% increase in the average selling price per PTC unit. The acquisition of
Itronix Corporation ("Itronix") in the fourth quarter of fiscal 1993 has
contributed to these increases. For fiscal 1994 Itronix product revenues
increased $23.8 million as compared with the one month reported results in
fiscal 1993.
Customer service revenues increased $2.4 million or 6% for fiscal 1994 as
compared to fiscal 1993. This growth was due to the increase in the installed
base of the Company's products offset by a reduction in the discretionary
spending by customers for servicing of the PTC installed base. The acquisition
of Itronix again contributed to this revenue increase. Fiscal 1994 customer
service revenues generated by Itronix increased $1.3 million as compared with
fiscal 1993.
Revenues from the Company's international operations (including Canada) were
$83.8 million and $73.7 million in fiscal 1994 and 1993, respectively. This
increase was primarily attributable to increased sales to unaffiliated
international distributors and increased Canadian subsidiary revenues.
Consolidated revenues for fiscal 1995 are expected to increase over fiscal 1994
levels.
1993 vs. 1992
Consolidated revenues for fiscal 1993 increased $23.4 million or 11% from
fiscal 1992. The Company's largest customer in fiscal 1993, Wal-Mart Stores,
Inc., accounted for approximately 11% of total revenues.
Product revenues for fiscal 1993 increased $19.6 million or 11% from fiscal
1992. The product revenue increase was due to a 7% increase in average selling
price per PTC unit and a 4% increase in PTC unit volume. The lower average
selling price in fiscal 1992 was due primarily to the sale of a significant
number of low-end model PTC units in 1992 to a single customer. The PTC unit
volume increase was primarily due to shipments to Wal-Mart Stores, Inc. to
equip its stores with the Company's wireless spread spectrum systems.
Customer service revenues for fiscal 1993 increased $3.8 million or 10% from
fiscal 1992. This revenue growth was due to continuing growth in the installed
base of the Company s products and through the addition of specialized service
contracts. These specialized service contracts include "depot express" that
guarantees one-day service and provides customers a service which tracks and
maintains inventory records for customers spare parts and a "just in time"
program that offers spare Telxon equipment supplied on-site to the customer
virtually eliminating system downtime.
20
<PAGE> 21
Revenues from the Company's international operations (including Canada) were
$73.7 million and $70.6 million in fiscal 1993 and 1992, respectively.
International revenues as a percentage of total revenues were 31% and 33% in
fiscal 1993 and 1992, respectively.
Costs and Operating Expenses
1994 vs. 1993
Total operating expenses, as a percentage of revenues, were lower in fiscal
1994 as compared to 1993 due primarily to corporate re-engineering costs and
other non-recurring charges recognized in the prior year.
Cost of revenues as a percentage of total revenues was 59% in fiscal 1994 as
compared to 64% in fiscal 1993. The reduction was primarily attributable to
costs related to non-recurring events in fiscal 1993 including the
discontinuance of older product lines, expenses related to the consolidation of
the customer service depots and costs related to the corporate re-engineering
program. Additionally, fiscal 1993 results reflected lower margins
attributable to a single large contract and general pricing pressures.
Selling expenses as a percentage of revenues were 20% in both fiscal 1994 and
1993. Fiscal 1993 selling expense included certain non-recurring severance and
relocation charges. The absence of these charges in fiscal 1994 was offset by
additional expenses related to the acquisitions made in the fourth quarter of
fiscal 1993, variable selling expenses related to revenue growth, and expenses
relating to the initial formation of VSG.
Product development and engineering expenses were 10% and 8% of revenues in
fiscal 1994 and 1993, respectively. The increase in fiscal 1994 as compared to
1993 was primarily attributable to research and development activities related
to new product development. These activities included research and development
costs associated with wireless data communications and spread spectrum
technology, pen-based technology and other product improvements. The product
introductions as a result of these expenditures began in the fourth quarter of
fiscal 1994 and are expected to continue into fiscal 1995.
General and administrative expenses as a percentage of revenues were 11% and
15% for fiscal years 1994 and 1993, respectively. The decrease is primarily
attributable to the unusual and non-recurring charges in the prior year,
including severance charges, increased provision for doubtful accounts and
increased consulting and professional fees, partially offset by increases in
expenses resulting from acquisitions made in the fourth quarter of fiscal 1993
and additional corporate expenses to support the Company's revenue growth.
Selling, product development and engineering and administrative expenses are
expected to decrease as a percentage of revenues for fiscal 1995 as compared to
fiscal 1994.
1993 vs. 1992
Operating expenses, as a percentage of revenues, were generally higher in
fiscal 1993 than fiscal 1992 due to corporate re-engineering costs, increased
technology investments and other non-recurring charges.
21
<PAGE> 22
Cost of revenues as a percentage of total revenues was 64% in fiscal 1993, as
compared to 53% in fiscal 1992. Of this 11% increase, 6% was attributable to
increased costs aggregating $14.2 million, reflecting an increase in
inventory reserves and other expenses associated with discontinuance of older
product lines, expenses resulting from consolidating customer service into new
facilities, costs related to accelerating the quality of customer support
programs and other costs including management consulting services and severance
costs relating to corporate re-engineering. Lower margins attributable to a
large contract and general pricing pressures accounted for the remainder of the
increase.
Selling expenses as a percentage of revenues were 20% in both fiscal 1993 and
1992. This percentage remained constant despite substantial severance and
relocation charges in fiscal 1993 due to cost containment efforts. The
increase in selling expenses in fiscal 1993 as compared to fiscal 1992 reflects
expenses relating to the acquisitions described in Note 14 to the Consolidated
Financial Statements and the additional cost associated with direct sales and
support personnel needed to adequately support the Company's revenue growth.
Product development and engineering expenses as a percentage of revenues were
8% and 6% in fiscal 1993 and 1992, respectively. The increase was primarily
due to research and development activities related to acquisitions and
increased product development in the second half of fiscal 1993. These
activities included product refinement and prototype costs associated with
wireless data communications and spread spectrum technology, pen-based
technology and other product improvements.
General and administrative expenses as a percentage of revenues were 15% for
fiscal 1993, an increase of 5% from 10% in fiscal 1992. The increase was
primarily attributable to unusual and non-recurring charges aggregating $14.8
million that were recognized in fiscal 1993. These costs included severance
for the former Chief Executive Officer and others, increased amortization of
intangibles related to acquisitions, increased provision for doubtful accounts,
increased consulting and professional fees, non-cash compensation related to
restricted stock grants, settlements of disputes with customers and suppliers
and a valuation allowance for fixed assets.
Interest Income (Expense)
1994 vs. 1993
Net interest income (expense) as a percentage of revenues was (.6%) and (.2%)
in fiscal 1994 and 1993, respectively. The increase in fiscal 1994 as compared
to fiscal 1993 reflected the lower average cash and short-term investment
balances primarily due to increased investing activities aggregating $26.9
million which caused cash requirements in excess of internally generated funds.
These investing activities are discussed in greater detail below.
22
<PAGE> 23
1993 vs. 1992
Net interest income (expense) as a percentage of revenues was (.2%) and .4% in
fiscal 1993 and 1992, respectively. The change to net interest expense in
fiscal 1993 as compared to net interest income in fiscal 1992 reflected the
lower average cash and short-term investment balances throughout fiscal 1993
which were primarily due to the increased cash used in investing and financing
activities aggregating $28.5 million offset by increased cash flows from
operating activities of $13.8 million.
Income Taxes
1994 vs. 1993
The Company's effective income tax rate was 46% in fiscal 1994. The
consolidated effective tax rate reflects the loss before taxes increased by
nondeductible goodwill amortization, the sum of which is multiplied by the
United States statutory rate and increased by international rate differentials,
partially offset by research and development credits and adjustment to the
valuation allowance. On August 10, 1993, the President signed into law the
Omnibus Budget Reconciliation Act of 1993 which contains certain provisions
covering the calculation of the corporate income tax liability. These income
tax law changes did not have a significant effect.
1993 vs. 1992
The Company's effective rates for income tax expense (benefit) were (26%) and
37% in fiscal 1993 and 1992, respectively. The consolidated effective tax rate
for fiscal 1993 reflects the benefit from the net operating loss carryback for
the U.S. operations to prior years offset by the international tax rate
differential and non-deductible goodwill amortization.
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"). SFAS No. 109 requires a change from the deferred method of
accounting for income taxes of Accounting Principles Board Opinion 11 to the
asset and liability method. Effective April 1, 1992, the Company adopted the
provisions of SFAS No. 109 and reported, in the amount of $.4 million, the
cumulative effect of the accounting change in the fiscal 1993 consolidated
statement of income.
Liquidity
1994 vs. 1993
At March 31, 1994, the Company had cash, cash equivalents and short-term
investments of $24.8 million, as compared with $27.2 million at March 31, 1993.
The Company's current ratio (current assets divided by current liabilities) was
1.8:1 and 2.6:1 at March 31, 1994 and 1993, respectively. The primary
components of this decrease in working capital and the current ratio were
decreases in cash and short-term investments of $2.4 million and refundable
income taxes of $3.0 million and increases in notes payable of $24.6 million
and accounts payable of $26.7 million. The increase in accounts payable is a
direct result of increased inventory purchases.
23
<PAGE> 24
These decreases to working capital were offset by increases to inventories of
$27.9 million and accounts and notes receivable of $24.2 million. The increase
in inventories was primarily due to long lead-time procurement for pen-based
product offerings, increased safety stock levels related to the move of the
Company's manufacturing operations and the revenue growth experienced in the
later part of the fiscal year. Although the Company has increased its
investment in accounts receivable, days sales outstanding has decreased to 57
days at March 31, 1994 from 73 days at March 31, 1993. The Company believes
this is a result of increased control over the granting of extended credit
terms and increased management emphasis on cash collections and monitoring of
past due accounts.
The Company believes that its existing resources, including available cash,
short-term investments, internally generated funds and credit facility, will be
sufficient to meet working capital requirements for the next twelve months.
1993 vs. 1992
At March 31, 1993, the Company had cash, cash equivalents and short-term
investments of $27.2 million as compared with $42.3 million at March 31, 1992.
The Company's current ratio (current assets divided by current liabilities) was
2.6:1 and 3.6:1 at March 31, 1993 and March 31, 1992, respectively. The
primary components of the decrease in working capital and the current ratio
were decreases in cash and short-term investments of $15.1 million, accounts
receivable of $5.9 million and inventories of $6.2 million, and increases in
accounts payable of $2.2 million and accrued liabilities of $9.8 million.
These decreases were partially offset by an increase in refundable income taxes
of $4.7 million and a decrease in income taxes payable of $2.6 million.
These working capital changes were primarily due to the Company's
re-engineering of operations which included significant investments in new
products and technologies.
Cash Flows from Operations
1994 vs. 1993
Cash flows (used in) provided by operations were $(2.4) million and $19.4
million in fiscal 1994 and 1993, respectively. Fiscal 1994 cash flows were
positively impacted by the reduction in the net loss reported of $9.3 million
and net increases in non-cash charges of $4.3 million. These positive impacts
were offset by changes in assets and liabilities which had a net negative
impact aggregating $35.4 million. All such changes are detailed on the
consolidated statement of cash flows.
1993 vs. 1992
Cash flows provided by operations were $19.4 million and $5.5 million in fiscal
1993 and fiscal 1992, respectively. Fiscal 1993 cash flows were negatively
impacted by the net loss of $12.1 million in fiscal 1993 versus net income of
$17.0 in fiscal 1992, a net decrease to operating cash flows of $29.1 million.
This decrease was more than offset by net increases to non-cash charges of
$10.5 million and changes in assets and liabilities which had a positive $32.4
million impact. All such changes are detailed on the consolidated statement of
cash flows.
24
<PAGE> 25
Investing Activities
1994 vs. 1993
The Company invested $21.7 million and $16.4 million in facilities and capital
equipment in fiscal 1994 and 1993, respectively. This increase in additions
included the construction of new manufacturing and customer service facilities
which began during the first quarter of fiscal 1994 in Houston, Texas. Cash
flows from investing activities were also reduced by decreased utilization of
short-term investments of $24.4 million. This decrease was offset by
reductions in payments for acquisitions and contract rights and other of $6.4
million and $6.6 million, respectively.
1993 vs. 1992
The Company invested $16.4 million and $9.0 million in capital equipment in
fiscal 1993 and 1992, respectively. Capital investments were primarily
concentrated in the continued automation and expansion of manufacturing
operations, information systems used in hardware and software development,
administrative functions and facilities expansion. Additionally, in fiscal
1993, the Company invested $10.4 million and $6.6 million in acquisitions and
contract rights, respectively. See Note 14 to the Consolidated Financial
Statements for details of these transactions. These investments are consistent
with management's strategy to strengthen the Company's technological and market
positions. These expenditures were offset in 1993 by a liquidation of $24.3
million in short-term investments compared to an increase in short-term
investments of $9.1 million in fiscal 1992.
Financing Activities
1994 vs. 1993
Cash flows from financing activities increased $27.2 million for fiscal 1994 as
compared to fiscal 1993. This increase was primarily due to both short-term
and long-term borrowings aggregating $26.4 million in fiscal 1994 versus
short-term borrowing repayments of $1.3 million in fiscal 1993.
Effective October 20, 1993, the Company entered into a revolving credit, term
loan and security agreement which, as amended, is with two banks through March
31, 1996. The agreement calls for a credit limit of $50 million and bears
interest at the prime lending rate plus 1% or LIBOR plus 2.5%. At March 31,
1994, the Company had $24.6 million outstanding under this agreement. The
Company anticipates continued borrowing under this agreement during fiscal
1995.
1993 vs. 1992
Cash flows from financing activities decreased $3.7 million for fiscal 1993 as
compared to 1992. This decrease was primarily due to a $2.4 million decrease
in stock option activity and the repayment of a $1.3 million short-term
borrowing by one the Company's international subsidiaries.
25
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Financial Reports:
Report of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Consolidated Financial Statements:
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Consolidated Statement of Changes in Stockholders Equity . . . . . . . . . . . . . . . . . . . . . . 32
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33-50
Financial Statement Schedules:
II - Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees Other
Than Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
VIII - Valuation and Qualifying Accounts and Reserves . . . . . . . . . . . . . . . . . . . . . . . 58
IX - Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
X - Supplementary Income Statement Information . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is presented in the financial statements or the notes thereto.
26
<PAGE> 27
REPORT OF MANAGEMENT
To the Board of Directors and Stockholders
of Telxon Corporation
The management of Telxon is responsible for the preparation, integrity and
objectivity of the financial statements and all other financial information
included in this report. Management believes that the financial statements
have been prepared in accordance with generally accepted accounting principles
and that any amounts included herein which are based on estimates of the
expected effects of events and transactions have been made with sound judgment
and approved by qualified personnel.
Telxon maintains an internal control structure to provide reasonable assurance
that assets are safeguarded and that transactions and events are recorded
properly. The internal control structure is regularly reviewed, evaluated and
revised as necessary by management. Additionally, the Telxon Statement of
Corporate Ethics requires every Company employee to maintain the highest level
of ethical standards in the conduct of all aspects of the Company s business,
and their compliance is regularly monitored.
The financial statements in this report have been audited by the independent
accounting firm of Coopers & Lybrand. Their audits were conducted in
accordance with generally accepted auditing standards and included a study and
evaluation of our internal control structure as they considered necessary to
determine the extent of tests and audit procedures required for expressing an
opinion on the Company's financial statements.
The Audit Committee of the Board of Directors, of which all outside directors
are members, meets periodically with the independent auditors and management to
review accounting, auditing, internal control and financial reporting matters.
The external auditors have full and free access to the Audit Committee and its
individual members at any time.
/s/ ROBERT F. MEYERSON
Robert F. Meyerson
Chairman of the Board and
Chief Executive Officer
/s/ DAN R. WIPFF
Dan R. Wipff
President, Chief Operating Officer and
Chief Financial Officer
27
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Telxon Corporation
We have audited the consolidated financial statements and the financial
statement schedules of Telxon Corporation and Subsidiaries listed in the index
on page 26 of this Form 10-K. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Telxon
Corporation and Subsidiaries as of March 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 1994, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
As discussed in Note 1 to the consolidated financial statements, effective
April 1, 1992, the Company changed its method of accounting for income taxes.
As discussed in Note 15 to the consolidated financial statements, the Company
is a defendant in a Consolidated Class Action.
COOPERS & LYBRAND
Akron, Ohio
June 27, 1994
28
<PAGE> 29
Telxon Corporation
and Subsidiaries
Consolidated Balance Sheet
Dollars in Thousands (except per share amounts)
<TABLE>
<CAPTION>
March 31,
---------------
1994 1993
--------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash (including cash equivalents of
$8,478 and $21,962) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,041 $ 26,515
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 764 645
Accounts receivable, net of allowance for
doubtful accounts of $1,635 and $2,689 . . . . . . . . . . . . . . . . . . . . 64,009 43,908
Notes and other accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 5,723 1,603
Refundable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,848 4,803
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,267 51,340
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,288 9,132
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 185,940 137,946
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,561 31,337
Intangible and other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . 32,467 43,338
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $259,968 $212,621
======== ========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,573 $ --
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,344 16,650
Capital lease obligations due within one year . . . . . . . . . . . . . . . . . . 391 679
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,162 2,521
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,404 33,358
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 105,874 53,208
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 196
Convertible subordinated debentures . . . . . . . . . . . . . . . . . . . . . . . 24,734 24,734
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,182 6,264
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 135,253 84,402
Stockholders equity:
Preferred Stock, $1.00 par value per share;
500,000 shares authorized, none issued . . . . . . . . . . . . . . . . . . -- --
Common Stock, $.01 par value per share;
50,000,000 shares authorized, 15,346,329
and 15,201,883 shares outstanding . . . . . . . . . . . . . . . . . . . . 153 152
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 74,830 73,370
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,653 57,612
Equity adjustment for foreign currency
translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,587) (2,115)
Unearned compensation relating to restricted
stock awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,334) (800)
-------- --------
Total stockholders equity . . . . . . . . . . . . . . . . . . . . . . 124,715 128,219
-------- --------
Commitments and contingencies (Note 15) . . . . . . . . . . . . . . . . . . . -- --
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $259,968 $212,621
======== ========
</TABLE>
See accompanying notes to
consolidated financial statements
29
<PAGE> 30
Telxon Corporation
and Subsidiaries
Consolidated Statement of Income
<TABLE>
<CAPTION>
Dollars in thousands
(except per share amounts) Year ended March 31,
---------------------------------------------
1994 1993 1992
--------- -------- ---------
<S> <C> <C> <C>
Revenues:
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . $252,341 $197,116 $177,560
Customer service . . . . . . . . . . . . . . . . . . . . . . . . . 43,652 41,298 37,460
-------- -------- --------
Total revenues . . . . . . . . . . . . . . . . . . . . 295,993 238,414 215,020
-------- -------- --------
Costs and expenses:
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . 175,305 153,467 114,834
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . 59,894 46,393 42,564
Product development and engineering
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,058 17,798 12,131
General and administrative expenses . . . . . . . . . . . . . . . 31,854 36,113 21,249
-------- -------- --------
Total costs and expenses . . . . . . . . . . . . . . . . . 296,111 253,771 190,778
-------- -------- --------
Income (loss) from operations . . . . . . . . . . . . . . (118) (15,357) 24,242
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 653 1,947 2,998
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,459) (2,271) (2,203)
-------- -------- --------
Income (loss) before income
taxes, extraordinary items
and cumulative effect of an
accounting change . . . . . . . . . . . . . . . . . . . . (1,924) (15,681) 25,037
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . 875 (4,056) 9,139
-------- -------- --------
Income (loss) before extra-
ordinary items and cumulative
effect of an accounting change . . . . . . . . . . . . . (2,799) (11,625) 15,898
Extraordinary items:
Income tax effect of net operating
loss carryover utilized . . . . . . . . . . . . . . . . . . . -- -- 1,091
-------- -------- --------
Income (loss) before cumulative
effect of an accounting change . . . . . . . . . . . . . (2,799) (11,625) 16,989
======== ======== ========
Cumulative effect of a change in
accounting for income taxes . . . . . . . . . . . . . . . . . . . . . -- (439) --
-------- -------- --------
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ (2,799) $(12,064) $ 16,989
-------- -------- --------
Earnings per common and common
equivalent share:
Income (loss) before extraordinary
items and cumulative effect of an
accounting change . . . . . . . . . . . . . . . . . . . . . . $ (.18) $ (.79) $ 1.13
Income tax effect of net operating
loss carryover utilized . . . . . . . . . . . . . . . . . . . -- -- .08
-------- -------- --------
Income (loss) per share before
cumulative effect of an
accounting change . . . . . . . . . . . . . . . . . . (.18) (.79) 1.21
-------- -------- --------
Cumulative effect of a change in
accounting for income taxes . . . . . . . . . . . . . . . . . -- (.03) --
-------- -------- --------
Net income (loss) per share . . . . . . . . . . . . . . . $ (.18) $ (.82) $ 1.21
======== ======== ========
Average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . . . . . 15,424,658 14,696,426 14,066,980
</TABLE>
See accompanying notes to
consolidated financial statements
30
<PAGE> 31
Telxon Corporation
and Subsidiaries
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Dollars in Thousands Year ended March 31,
------------------------------------------------
1994 1993 1992
--------- -------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,799) $(12,064) $ 16,989
Adjustments to reconcile net income (loss)
to net cash (used in) provided by oper-
ating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 19,738 14,322 11,484
Cumulative effect of an accounting
change . . . . . . . . . . . . . . . . . . . . . . . . . -- 439 --
Non-cash compensation related to
restricted stock awards . . . . . . . . . . . . . . . . 795 829 --
Provision for doubtful accounts . . . . . . . . . . . . . . 817 2,745 458
Provision for inventory obsolescence . . . . . . . . . . . . 6,674 9,700 1,492
Deferred income taxes . . . . . . . . . . . . . . . . . . . (313) (4,879) (181)
Write-down of fixed assets . . . . . . . . . . . . . . . . . -- 527 --
Loss on disposal of assets . . . . . . . . . . . . . . . . . 425 183 100
Changes in assets and liabilities:
Accounts and notes receivable . . . . . . . . . . . . . (24,400) 2,930 (12,279)
Refundable income taxes . . . . . . . . . . . . . . . . 2,955 (4,671) 135
Inventories . . . . . . . . . . . . . . . . . . . . . . (35,190) (952) (12,968)
Prepaid expenses and other . . . . . . . . . . . . . . . (871) 3,674 (4,466)
Intangibles and other assets . . . . . . . . . . . . . . 1,543 (4,173) (903)
Accounts payable and accrued
liabilities . . . . . . . . . . . . . . . . . . . . 31,534 10,840 3,840
Income taxes payable . . . . . . . . . . . . . . . . . . (359) 149 1,909
Other long-term liabilities . . . . . . . . . . . . . . (2,994) (239) (89)
-------- ------- --------
Total adjustments . . . . . . . . . . . . . . . 354 31,424 (11,468)
Net cash (used in) provided by
operating activities . . . . . . . . . . . . . . . . . . (2,445) 19,360 5,521
Cash flows from investing activities:
Proceeds from disposal of fixed
assets . . . . . . . . . . . . . . . . . . . . . . . 750 -- --
Additions to property and equipment . . . . . . . . . . . . (21,702) (16,443) (9,044)
Purchase of contract right and other . . . . . . . . . . . . -- (6,637) --
Short-term investments . . . . . . . . . . . . . . . . . . . (119) 24,268 (9,145)
Payments for acquisitions, net of cash
acquired . . . . . . . . . . . . . . . . . . . . . . . . (3,964) (10,378) 411
Software investments . . . . . . . . . . . . . . . . . . . . (318) (175) (206)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . (520) -- (1,119)
-------- ------- --------
Net cash used in investing
activities . . . . . . . . . . . . . . . . . . . . . . . (25,873) (9,365) (19,103)
Cash flows from financing activities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . 24,330 (1,272) 51
Proceeds from long-term financing
agreement . . . . . . . . . . . . . . . . . . . . . . . 2,080 -- --
Principal payments on capital leases . . . . . . . . . . . . (787) (940) (964)
Proceeds from exercise of stock
options (includes tax benefit) . . . . . . . . . . . . . 125 752 3,168
Payment of cash dividends . . . . . . . . . . . . . . . . . (152) (152) (139)
------- ------- -------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . . . 25,596 (1,612) 2,116
Effect of exchange rate changes on
cash . . . . . . . . . . . . . . . . . . . . . . . . . . 248 758 (109)
------- ------- -------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . (2,474) 9,141 (11,575)
Cash and cash equivalents at beginning
of year . . . . . . . . . . . . . . . . . . . . . . . . 26,515 17,374 28,949
------- ------- -------
Cash and cash equivalents at end of . . . . . . . . . . . .
year . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,041 $ 26,515 $ 17,374
========= ======== =========
</TABLE>
See accompanying notes to
consolidated financial statements
31
<PAGE> 32
Telxon Corporation
and Subsidiaries
Consolidated Statement of
Changes in Stockholders' Equity
Dollars in Thousands (except per share amounts)
<TABLE>
<CAPTION>
Equity
Adjustment
Additional for Foreign
Common Paid-in Retained Currency Unearned
Stock Capital Earnings Translation Compensation
------ ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1991 . . . . . . . . . $133 $45,503 $55,745 $ 782 $ --
Exercise of stock options . . . . . . 8 7,119 -- -- --
Dividends paid - $.01 per
share . . . . . . . . . . . . . -- -- (139) -- --
Income tax benefit from
stock option transac-
tions . . . . . . . . . . . . . -- 2,279 -- -- --
Common Stock retired
(187,500 shares) . . . . . . . . . (2) (1,450) (2,507) -- --
Adjustment for foreign
currency translation . . . . . . . -- -- -- (62) --
Net income for 1992 . . . . . . . . . -- -- 16,989 -- --
---- ------- ------- ------- ------
Balance at March 31, 1992 . . . . . . . . . 139 53,451 70,088 720 --
Exercise of stock options . . . . . . 1 1,352 -- -- --
Dividends paid - $.01 per
share . . . . . . . . . . . . . -- -- (152) -- --
Income tax benefit from
stock option transac-
tions . . . . . . . . . . . . . -- 1,446 -- -- --
Common Stock retired
(27,527 shares) . . . . . . . . . -- (247) (260) -- --
Stock issued under re-
stricted stock plan,
net of amortization . . . . . . . 1 1,149 -- -- (800)
Issuance of stock related
to acquisitions . . . . . . . . . 11 16,219 -- -- --
Adjustment for foreign
currency translation . . . . . . . -- -- -- (2,835) --
Net loss for 1993 . . . . . . . . . . -- -- (12,064) -- --
---- ------- ------- ------- ------
Balance at March 31, 1993 . . . . . . . . . 152 73,370 57,612 (2,115) (800)
Exercise of stock options . . . . . . -- 120 -- -- --
Dividends paid - $.01 per
share . . . . . . . . . . . . . -- -- (152) -- --
Income tax benefit from
stock option transac-
tions . . . . . . . . . . . . . -- 23 -- -- --
Common stock retired
(1,503 shares) . . . . . . . . . . -- (9) (8) -- --
Stock issued under re-
stricted stock plan, net
of amortization . . . . . . . . . 1 1,326 -- -- (534)
Adjustment for foreign
currency translation . . . . . . . -- -- -- (1,472) --
Net loss for 1994 . . . . . . . . . . -- -- (2,799) -- --
---- ------- ------- ------- -------
Balance at March 31, 1994 . . . . . . . . . $153 $74,830 $54,653 $(3,587) $(1,334)
==== ======= ======= ======= ======
</TABLE>
See accompany notes to
consolidated financial statements
32
<PAGE> 33
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
Dollars in Thousands (except per share amounts)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the financial statements of the
Company and its subsidiaries. All significant intercompany transactions have
been eliminated in consolidation.
Foreign Currency Translation
The financial statements of foreign operations are translated into U.S. dollars
in accordance with Statement of Financial Accounting Standards No. 52.
Accordingly, all assets and liabilities are translated at current rates of
exchange, and operating transactions are translated at weighted average rates
during the year. The translation gains and losses are accumulated as a
separate component of stockholders' equity until realized.
Cash and Cash Equivalents
The Company considers all highly liquid investments which are both readily
convertible to cash and have a maturity of three months or less when purchased
to be cash equivalents. At March 31, 1994, the Company had restricted cash of
$1,000 related to funds held in escrow related to an acquisition. Because the
restriction lapses within one year, these funds have been classified as current
assets.
Short-Term Investments
Short-term investments are stated at the lower of cost or market. The Company
has a widely diversified investment portfolio which is not concentrated in any
one investment instrument or industry. The difference between the aggregate
cost or market value for such investments was not material as of March 31, 1994
and 1993.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment
Depreciation of property and equipment is provided over the estimated useful
lives of the assets using the straight-line method for financial reporting
purposes. The ranges of the estimated useful lives are: buildings, 19 years;
machinery and equipment, furniture and fixtures, and transportation equipment,
3-10 years; marketing, customer service equipment, and tooling, 3 years; and
leasehold improvements, over the shorter of the useful life of the asset or the
life of the lease.
Software Costs, Intangibles and Other Assets
Software costs are capitalized in accordance with Statement of Financial
Accounting Standards No. 86.
33
<PAGE> 34
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Purchased computer software is capitalized and amortized for both financial and
tax reporting purposes, using the straight-line method, over the expected
useful life of the software, generally from three to seven years. Similarly,
internally developed computer software is capitalized and amortized for
financial reporting purposes using the straight-line method over three years;
for tax purposes, however, these costs are expensed as incurred. Product
development and engineering expenses are expensed as incurred for both
financial and tax reporting purposes.
Convertible subordinated debenture issue costs are amortized over the life of
the debt, with accelerated amortization recorded on any debentures purchased;
goodwill is amortized over five to ten years; non-compete agreements are
amortized over the life of the related contract; and other assets are amortized
over their expected useful life.
Revenue Recognition
Revenues from hardware sales and software licenses are recognized at the time
of shipment. In accordance with Statement of Position 91-1, "Software Revenue
Recognition", revenues from custom application software sales are recognized
using a percentage-of-completion method. Revenues from customer service are
recognized ratably over the maintenance contract period or as the services are
performed.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"). Effective April 1, 1992, the Company adopted the provisions of SFAS
No. 109 and has reported the $.4 million cumulative effect of that change in
the method of accounting for income taxes in the fiscal 1993 consolidated
statement of income. SFAS No. 109 requires a change from the deferred method
of accounting for income taxes of Accounting Principles Board Opinion No. 11
("APB 11") to the asset and liability method. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
reporting basis of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of tax rate changes is recognized
in income in the period that includes the enactment date. Tax credits, when
available, are applied to reduce the provision for income taxes in the year in
which the credits arise. Undistributed earnings of foreign subsidiaries are
reinvested in their operations. Accordingly, no provision is made for
additional income taxes that might be payable on the distribution of such
earnings.
34
<PAGE> 35
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Pursuant to the provisions of APB 11, which was applied in fiscal 1992 and
prior years, deferred income taxes were recognized for income and expense items
that were reported in different years for financial reporting purposes and
income tax purposes using the tax rate applicable for the year of the
calculation. Under this method, deferred taxes were not adjusted for
subsequent changes in tax rates.
Earnings Per Share
Computations of earnings per common and common equivalent share of Common Stock
are based on the weighted average number of common shares outstanding during
the period (15,211,000 in 1994, 13,991,000 in 1993, and 13,630,000 in 1992),
increased by the net shares issuable on the assumed exercise of stock options
using the treasury stock method (214,000 in 1994, 705,000 in 1993, and 437,000
in 1992). Common Stock purchase rights outstanding under the Company's
stockholder rights plan, which potentially have a dilutive effect, have been
excluded from the weighted common shares computation as preconditions to the
exercisability of such rights were not satisfied.
Reclassifications
Certain items in the 1993 and 1992 consolidated financial statements and notes
thereto have been reclassified to conform to the 1994 presentation.
NOTE 2 -- INVENTORIES
Inventories at March 31 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------- --------
<S> <C> <C>
Purchased components . . . . . . . . . . . . . . . . . . . . . . . . . $44,378 $30,686
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,664 9,451
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,225 11,203
------- -------
$79,267 $51,340
======= =======
</TABLE>
NOTE 3 -- PROPERTY AND EQUIPMENT
Property and equipment, at cost, at March 31 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------- --------
<S> <C> <C>
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . $39,426 $33,119
Tooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,243 11,851
Furniture and office equipment . . . . . . . . . . . . . . . . . . . . . 13,889 12,168
Capital lease assets and other . . . . . . . . . . . . . . . . . . . . . 6,203 3,882
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . 6,032 5,845
Buildings, improvements and leasehold interest . . . . . . . . . . . . 4,808 2,738
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,978 420
Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . 2,434 2,221
------- -------
90,013 72,244
Less-accumulated depreciation and
amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 48,452 40,907
------- -------
$41,561 $31,337
======= =======
</TABLE>
35
<PAGE> 36
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Depreciation expense for 1994, 1993 and 1992 amounted to $11,238, $8,848 and
$7,233, respectively.
Net capital lease retirements were $1,492, $190 and $181 in 1994, 1993 and
1992, respectively. These additions or retirements are non-cash transactions
and, accordingly, have been excluded from property and equipment additions in
the accompanying consolidated statement of cash flows. Amortization of capital
lease assets has been included in depreciation expense. Accumulated
depreciation related to capital lease assets aggregated $473, $2,101 and $1,466
in 1994, 1993 and 1992, respectively.
NOTE 4 -- INTANGIBLE AND OTHER ASSETS
Intangible and other assets, net, consisted of the following at March 31:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Capitalized software, net of amortization of $8,346 and $6,947 . . . . . $ 4,433 $ 5,151
Goodwill relating to acquisitions, net of
amortization of $7,551 and $3,408 . . . . . . . . . . . . . . . . 19,354 25,156
Non-compete agreements with former share-
holders of acquisitions, net of
amortization of $3,234 and $1,318 . . . . . . . . . . . . . . . . 3,236 5,152
Licenses, net of short-term portion of
$700 and amortization of $1,050 and $350 . . . . . . . . . . . . . 1,050 1,750
Convertible subordinated debenture issue
costs, net of amortization of $900 and $868 . . . . . . . . . . . 581 613
Other, net of amortization of $5,595 and $5,285 . . . . . . . . . . . . 3,813 5,516
------- -------
$32,467 $43,338
======= =======
</TABLE>
Amortization expense for the years ended March 31, was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Capitalized software . . . . . . . . . . . . . . . . . . $1,399 $1,560 $1,109
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . 4,143 2,179 397
Non-compete agreements . . . . . . . . . . . . . . . . . 1,916 1,318 --
Licenses . . . . . . . . . . . . . . . . . . . . . . . . 700 350 --
Convertible subordinated debenture issue costs . . . . . 32 32 32
Prepaid royalty . . . . . . . . . . . . . . . . . . . . -- -- 1,750
Other . . . . . . . . . . . . . . . . . . . . . . . . . 310 35 963
------ ------ ------
$8,500 $5,474 $4,251
====== ======= ======
</TABLE>
36
<PAGE> 37
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
In connection with the acquisition of Teletransaction Inc.
("Teletransaction"), the Company acquired the rights to consulting services
(principally performed by Robert F. Meyerson, Chairman of the Board and Chief
Executive Officer) from Accipiter Corporation ("Accipiter"), which is owned
by Mr. Meyerson's wife and also secured a non-competition covenant from
Accipiter and Mr. Meyerson. Aggregate payments for these rights were $3.6
million. The cost of these rights is being amortized over the five year terms
of the agreements. See Note 14 for a description of the Teletransaction
acquisition.
NOTE 5 -- SHORT-TERM FINANCING
Effective October 20, 1993, the Company entered into a revolving credit, term
loan and security agreement which, as amended, is with two banks through March
31, 1996. The agreement calls for a credit limit of $50 million and bears
interest at the banks' prime lending rate plus 1% or LIBOR plus 2.5%. The
facility is secured by substantially all of the United States assets and
certain foreign assets of the Company. The agreement contains restrictive
covenants, certain of which require the Company to maintain specified levels of
net worth and working capital and to meet certain current ratios, debt to net
worth ratios, and fixed charge coverages. At March 31, 1994, the Company had
$24,573 outstanding under the revolving credit facility of this agreement and
was in compliance with all restrictive covenants contained in the agreement.
NOTE 6 -- ACCRUED LIABILITIES
Accrued liabilities at March 31 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Current liability to former shareholders of acquired companies . . . . . . . . . . $ 1,533 $ 3,541
Accrued payroll and other employee compensation . . . . . . . . . . . . . . . . . 10,610 10,160
Accrued commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,362 1,522
Accrued taxes other than payroll and income taxes . . . . . . . . . . . . . . . . 1,715 1,930
Deferred customer service revenues . . . . . . . . . . . . . . . . . . . . . . . . 9,240 7,545
Accrued royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,737 1,021
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,207 7,639
------- -------
$35,404 $33,358
======= =======
</TABLE>
NOTE 7 -- INCOME TAXES
Components of income (loss) before income taxes, extraordinary items and
cumulative effect of an accounting change follow:
<TABLE>
<CAPTION>
1994 1993 1992
------- -------- -------
<S> <C> <C> <C>
Domestic operations . . . . . . . . . . . . . . . . . . . . . $(6,325) $(24,330) $17,979
International operations . . . . . . . . . . . . . . . . . . . 4,401 8,649 7,058
------- -------- -------
$(1,924) $(15,681) $25,037
======= ======== =======
</TABLE>
37
<PAGE> 38
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
As discussed in Note 1, the Company adopted the provisions of SFAS No. 109,
effective April 1, 1992. The cumulative effect of this change in accounting
for income taxes of $439 was determined as of April 1, 1992 and is reported
separately in the consolidated statement of income for the year ended March 31,
1993. The effect of applying SFAS No. 109 on income (loss) before
extraordinary items and cumulative effect of an accounting change for the year
ended March 31, 1993 was insignificant. Prior years' financial statements have
not been restated to apply the provisions of SFAS No. 109.
Components of the provision (benefit) for income taxes by taxing jurisdiction
follow:
<TABLE>
<CAPTION>
Currently payable (refundable): 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,748) $(3,587) $5,347
State and local . . . . . . . . . . . . . . . . . . . . . . . . . 70 (11) 703
International . . . . . . . . . . . . . . . . . . . . . . . . . . 1,801 2,653 2,179
------- ------- ------
123 (945) 8,229
------- ------- ------
Deferred:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (382) (4,221) (149)
State and local . . . . . . . . . . . . . . . . . . . . . . . . . (121) (13) --
International . . . . . . . . . . . . . . . . . . . . . . . . . . 203 (206) (32)
------- ------- ------
(300) (4,440) (181)
------- ------- ------
Charge equivalent to tax effect of
operating loss carryovers utilized . . . . . . . . . . . . . . . 1,052 1,329 1,091
------- ------- ------
U.S. and international taxes (benefit) on
income before extraordinary credit . . . . . . . . . . . . . . . . $ 875 $(4,056) $9,139
======= ======= ======
</TABLE>
The reconciliation between the reported total income tax expense (benefit) and
the amount computed by multiplying income (loss) before income taxes and
cumulative effect of an accounting change by the U.S. federal statutory tax
rate is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
U.S. federal statutory tax rate . . . . . . . . . . . . . . . . . . . . (34.0)% (34.0)% 34.0%
International tax rate differential
including adjustments for intercompany
eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48.4 5.3 3.5
State and local taxes . . . . . . . . . . . . . . . . . . . . . . . . . (1.8) (0.1) 2.2
Research and development credits . . . . . . . . . . . . . . . . . . . (22.6) (0.2) (0.3)
Tax benefits related to export sales . . . . . . . . . . . . . . . . . -- -- (1.2)
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80.1 3.5 0.4
Change in deferred tax asset valuation
allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16.2) -- --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8.4) (0.4) (2.1)
----- ----- -----
Consolidated effective income tax rate . . . . . . . . . . . . . . 45.5% (25.9)% 36.5%
===== ====== =====
</TABLE>
38
<PAGE> 39
Notes to Consolidated Financial Statements (Continued)
Deferred taxes related to temporary differences between the financial reporting
basis of assets and liabilities and their respective tax basis (1994 and 1993)
and timing differences in the recognition of revenues and expenses for tax and
financial reporting purposes (1992) follow:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------- ------
<S> <C> <C> <C>
Inventory obsolescence . . . . . . . . . . . . . . . . . . . . $(919) $(1,164) $(126)
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . (137) 55 (3)
Bad debt reserve . . . . . . . . . . . . . . . . . . . . . . . 412 (500) 185
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . (8) (15) 55
Computer software costs . . . . . . . . . . . . . . . . . . . (91) (102) (98)
Restricted stock compensation . . . . . . . . . . . . . . . . (214) 313 --
Restructuring reserves . . . . . . . . . . . . . . . . . . . . 495 (600) --
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . 325 (1,461) --
Other items . . . . . . . . . . . . . . . . . . . . . . . . (204) (966) (194)
----- ------- -----
$(341) $(4,440) $(181)
===== ======= =====
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at March 31, 1994 are presented
below:
<TABLE>
<CAPTION>
1994
-------
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 864
Inventory obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,400
Uniform capitalization costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 878
Restructuring reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
Severance and vacation pay accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,396
State and local income taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . 863
Net operating loss and research and development credit
carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,561
State and local tax carryovers, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . 707
Undistributed losses of affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490
Contribution and capital loss carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,267
-------
Total gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,154
Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,336)
-------
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,818
-------
Deferred tax liabilities:
Prepaid healthcare costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (344)
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,273)
Restricted stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (99)
State and local income taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . (206)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (160)
-------
Total gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,082)
-------
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,736
=======
</TABLE>
The valuation allowance for deferred tax assets as of April 1, 1993 was $3,163.
The net change in the total valuation allowance for the year ended March 31,
1994 was an increase of $1,173. The net deferred tax asset is deemed
realizable based on the Company's ability to recognize taxable income in prior
carryback years and is classified in the prepaid expenses and other ($4,230)
and intangible and other assets, net ($1,506) caption on the consolidated
balance sheet.
39
<PAGE> 40
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets as of March 31, 1994 will be allocated as follows:
<TABLE>
<CAPTION>
1994
------
<S> <C>
Income tax benefit that would be reported in the
consolidated statement of income . . . . . . . . . . . . . . $2,240
Income tax benefit that would reduce goodwill and
other noncurrent intangible assets . . . . . . . . . . . . 2,096
------
Total $4,336
======
</TABLE>
No provision for U.S. income taxes on $22,684 of undistributed earnings of
international subsidiaries at March 31, 1994 has been made because these
earnings are indefinitely reinvested in the subsidiaries. Determination of the
amount of the unrecognized deferred tax liability for temporary differences
related to investment in foreign subsidiaries is not practicable.
Income taxes paid in 1994, 1993 and 1992 were $2,282, $4,483 and $6,414,
respectively. Income tax refunds received in fiscal 1994 aggregated $5,486.
No income tax refunds were received in fiscal 1993 or fiscal 1992.
As of March 31, 1994, the Company had foreign operating loss carryovers and
research and development credit carryovers for both tax and financial reporting
purposes of $1,294 and $672, respectively. Certain of these carryovers
aggregating $512 for both tax and financial reporting purposes have indefinite
carryover periods. The remaining carryovers expire at various dates through
fiscal 1999. As a result of acquisitions in prior years, the Company has
domestic operating loss carryovers and research and development credit
carryovers for tax and financial reporting purposes in the amounts of $2,061
and $188, respectively. These carryovers expire at various dates through
fiscal 2008. There can be no assurance that foreign and U.S. tax carryovers
will be utilized.
NOTE 8 -- STOCK OPTIONS AND RESTRICTED STOCK
During the periods shown below, the Company had in effect three stock option
plans for the officers and other key employees of the Company - the Telxon
Corporation 1983 Stock Option Plan (the "1983 Plan"), the Telxon Corporation
1988 Stock Option Plan (the "1988 Plan") and the Telxon Corporation 1990 Stock
Option Plan (the "1990 Plan"). The options outstanding under the 1983 Plan,
the 1988 Plan and the 1990 Plan generally vest in equal installments over a
three-year period on the first three anniversary dates after the date of grant.
The option price is equal to the market price for the Company's Common Stock at
the time of grant.
40
<PAGE> 41
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The following is a summary of the activity in the Company's stock option plans
during fiscal 1992, 1993 and 1994:
<TABLE>
<CAPTION>
Stock Options
-----------------------------
Average Price
Shares Per Share
---------- ---------------
<S> <C> <C>
March 31, 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,850,510 $10.94
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,750 22.35
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (747,573) 9.06
Returned to pool due to employee
terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75,459) 12.72
---------
March 31, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,273,228 14.14
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 558,500 12.13
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (137,404) 9.00
Returned to pool due to employee
terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . (249,168) 15.04
---------
March 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,445,156 13.69
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803,011 10.68
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,003) 6.63
Returned to pool due to employee
terminations and one-for-two program . . . . . . . . . . . . . . . . (477,464) 20.11
---------
March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,752,700 $10.64
=========
</TABLE>
At March 31, 1994, there were no options outstanding or exercisable under the
1983 Plan. At March 31, 1994, there were 233,284 options outstanding and
exercisable under the 1988 Plan at $5.125 to $11.00 per share. At March 31,
1994, there were 1,519,416 options exercisable under the 1990 Plan at $8.75 to
$23.00 per share.
Options available to be granted under the 1990 Plan at March 31, 1994, were
297,679. No further options can be granted under the 1983 Plan or the 1988
Plan.
The Company also has in effect a stock option plan for non-employee directors
(the "Director Plan"). During the fiscal year ended March 31, 1994, 80,000
options were granted at an average price per share of $10.75. At March 31,
1994, there were 191,665 options outstanding under the Director Plan at $9.125
to $23.00 per share. Options available to be granted under the Director Plan
at March 31, 1994 were 50,000.
At March 31, 1994, there were 12,000 options outstanding and exercisable at
$14.63 per share which were not granted under the Company's stock option plans.
During fiscal 1993, no options were exercised.
Effective September 14, 1993, a committee of the Company's Board of Directors
approved a voluntary program which enabled all employees (other than directors)
of the Company as of September 14, 1993 to trade existing options under the
1990 Plan, with option prices in excess of the then current market price, for
new options on a one-for-two basis at $10.125 per share, the September 14, 1993
market price of the Company's stock. As a result of the program, there was a
174,911 shares net reduction in the stock options outstanding.
41
<PAGE> 42
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
In connection with its acquisition of Itronix Corporation ("Itronix") further
described in Note 14, the Company issued an aggregate of 47,980 shares of
restricted Company stock to three Itronix officers. Such shares were not
granted under the Restricted Stock Plan as described below. At March 31, 1994,
all such restricted shares continued to be subject to forfeiture.
During fiscal 1993, the Company adopted a Restricted Stock Plan (the
"Restricted Stock Plan"), under which 250,000 shares may be issued. A
committee of the Board of Directors determines the time periods during which
and the criteria upon which the Restricted Stock is subject to forfeiture.
During fiscal 1994, 70,000 shares, which vest over a three year period, were
granted under the Restricted Stock Plan. At March 31, 1994, 40,000 shares
granted under the Restricted Stock Plan prior to fiscal 1994 had vested,
130,000 shares granted thereunder (including 70,000 granted in fiscal 1994)
were outstanding subject to forfeiture and 80,000 shares were available for
grant.
NOTE 9 -- LEASES
The Company leases certain equipment under capital leases generally for terms
of five years or less with renewal and purchase options. The present value of
future minimum lease payments for these capital lease obligations is reflected
in the consolidated balance sheet as current and noncurrent capital lease
obligations. In addition, the Company leases office facilities, customer
service locations and certain equipment under noncancelable operating leases.
Future minimum lease payments for years ending March 31, are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 438 $ 6,266
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 5,552
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 4,659
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 3,482
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 3,064
2000 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 6,427
------ -------
925 $29,450
=======
Amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71)
------
Present value of net minimum lease payments . . . . . . . . . . . . . . . . . . . . . . 854
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (391)
------
Long-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 463
======
</TABLE>
The Company has an option to purchase the 100,000-square-foot facility
currently occupied by its corporate and engineering offices. The purchase
option is exercisable for a price equal to the fair market value of the
premises as determined by an independent appraisal prior to September 1, 2001.
Rent expense for 1994, 1993 and 1992 amounted to $7,962, $7,291 and $6,405,
respectively.
42
<PAGE> 43
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
NOTE 10 -- LONG-TERM DEBT
Long-term debt at March 31, 1994 and 1993 consisted of $24,734 of 7-1/2%
Convertible Subordinated Debentures issued June 1, 1987, due in the year 2012.
The current conversion price of $26.75 is subject to adjustment in certain
events. Interest is payable on June 1 and December 1 in each year, and
commenced December 1, 1987. On or after June 1, 1994, the Debentures are
redeemable at any time at the option of the Company, in whole or in part, at
102.25% of the principal amount redeemed, declining annually to par on and
after June 1, 1997. The sinking fund requires mandatory annual payments of 5%
of the original $46,000 principal amount commencing June 1, 1997, calculated to
retire 75% of the issue prior to maturity. During fiscal 1991, the Company
purchased and retired Debentures with a principal face amount aggregating
$21,266 which will be applied to the earliest of the Company's sinking fund
payment obligations.
Effective March 25, 1994, the Company entered into a long-term financing
agreement to borrow $2,080. The long-term portion of this debt is classified
in the other long-term liabilities caption of the consolidated balance sheet.
This agreement is secured by certain transportation equipment owned by the
Company and bears interest at the Federal Reserve Commercial Paper Rate plus
3.15%. At March 31, 1994, the actual rate was 6.77%. The maturities of this
note for the next four years after March 31, 1994 are $243, $257, $275, $294,
respectively. Amounts maturing thereafter aggregate $1,011.
In addition, the Company has a $500 subordinated promissory note assumed in
connection with the acquisition of Itronix, which is due June 30, 1996 and on
which interest is due at the rate of prime plus one-half percent. This note
has been classified in the other long-term liabilities caption of the
consolidated balance sheet.
Total interest paid by the Company in 1994, 1993 and 1992 was $2,498, $2,291,
and $2,148, respectively.
NOTE 11 -- STOCKHOLDERS' EQUITY
On May 3, 1985, the Board of Directors approved a stock split of three shares
for every two shares outstanding, effective June 21, 1985, for holders of
record on May 20, 1985.
On April 8, 1986, the Board of Directors approved a stock split of three shares
for every two shares outstanding, effective May 12, 1986, for holders of record
on April 22, 1986.
These stock splits have been retroactively reflected in the accompanying
financial statements and all stock-related disclosures.
During fiscal 1988, the Company purchased 544,100 shares or 4.1% of its Common
Stock for $7,283 at an average price of $13.39. As authorized by the Board of
Directors, the purchased shares were retired.
43
<PAGE> 44
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The exercise of non-qualified stock options results in state and federal income
tax benefits to the Company equal to the difference between the market price at
the date of exercise and the option price. During 1994, 1993 and 1992, $23,
$1,446 and $2,279, respectively was credited to additional paid-in capital as a
result of such option exercises.
NOTE 12 -- BUSINESS SEGMENT
The Company designs, develops, manufactures, markets and services portable
interactive microcomputer systems. The Company's business is a single segment.
The Company does not believe that it is dependent upon any one customer or
group of customers.
The Company sells its products to customers in diversified industries,
primarily in North America and Europe. The Company realizes approximately
one-half of its revenues from customers in retail industries who are in widely
diversified geographic locations and markets. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral.
The Company maintains reserves for potential credit losses, and such losses
have historically been within management's expectations.
The Company has operations in the United States, Europe, Canada, Australia and
Asia. Information for 1993, 1992 and 1991 follows below.
Of the U.S. revenues from unaffiliated customers in 1994, 1993 and 1992,
$14,704, $10,265, and $8,591 are export revenues from markets in Europe,
Canada, South America, Asia, Africa and the Middle East.
Transfers between geographic areas were at cost plus a negotiated mark-up.
Assets of geographic areas are identified with the operations of each area.
Corporate assets consist of property and equipment.
<TABLE>
<CAPTION>
United Adjustment &
1994 States Europe Other Elimination Consolidated
---- ------ ------- ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffiliated customers . . . $226,885 $44,561 $24,547 $ -- $295,993
Transfers between geographic areas . . . . 28,737 607 16,236 (45,580) --
-------- ------- ------- --------- --------
Total revenues . . . . . . . . . . $255,622 $45,168 $40,783 $(45,580) $295,993
======== ======= ======= ======== ========
Operating income . . . . . . . . . . . . . $ 20,462 $ 1,685 $ 3,247 $ (572) $ 24,822
======== ======= ======= ========
Interest expense, net . . . . . . . . . . . (1,806)
Foreign currency transaction gain, net. . . 254
Corporate expenses, net . . . . . . . . . . (25,194)
--------
Loss before income taxes, extraordinary
items, and cumulative effect of
an accounting change . . . . . . . . . . . $ (1,924)
========
Identifiable assets at March 31, 1994 . . . $186,801 $31,277 $31,292 $ -- $249,370
======== ======= ======= ========
</TABLE>
44
<PAGE> 45
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
<TABLE>
<CAPTION>
United Adjustment &
1994 States Europe Other Elimination Consolidated
---- ------ ------- ----- ------------- ------------
<S> <C>
Corporate assets . . . . . . . . . . . . . 10,598
--------
Total assets at March 31, 1994 . . . . . . $259,968
========
</TABLE>
<TABLE>
<CAPTION>
United Adjustment &
1993 States Europe Other Elimination Consolidated
---- ------ ------- ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffiliated customers . . . $175,022 $43,575 $19,817 $ -- $238,414
Transfers between geographic areas. . . . . 20,338 436 12,385 (33,159) --
------- ------- ------ -------- --------
Total revenues . . . . . . . . . $195,360 $44,011 $32,202 $(33,159) $238,414
======== ======= ======= ======== ========
Operating income . . . . . . . . . . . . . $ 1,684 $ 4,722 $ 4,263 $ (1,569) $ 9,100
======== ======= ======= ========
Interest expense, net . . . . . . . . . . . (324)
Foreign currency transaction gain, net. . . 589
Corporate expenses, net . . . . . . . . . . (25,046)
========
Loss before income taxes, extraordinary
items, and cumulative effect of
an accounting change . . . . . . . . . . . $(15,681)
========
Identifiable assets at March 31, 1993 . . . $146,081 $28,724 $28,861 $ -- $203,666
======== ======= ======= ========
Corporate assets . . . . . . . . . . . . . 8,955
--------
Total assets at March 31, 1993 . . . . . . $212,621
========
</TABLE>
<TABLE>
<CAPTION>
United Adjustment &
1992 States Europe Other Elimination Consolidated
---- ------ ------- ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffiliated customers . . . $153,032 $44,050 $17,938 $ -- $215,020
Transfers between geographic areas . . . . 21,031 866 -- (21,897) --
-------- ------- ------- -------- --------
Total revenues . . . . . . . . . . $174,063 $44,916 $17,938 $(21,897) $215,020
======== ======= ======= ======== ========
Operating income . . . . . . . . . . . . . $ 34,268 $ 5,823 $ 505 $ 139 $ 40,735
======== ======= ======= ========
Interest income, net . . . . . . . . . . . 795
Foreign currency transaction gain, net. . . 178
Corporate expenses, net . . . . . . . . . . (16,671)
--------
Income before income
taxes and extraordinary item . . . . . . $ 25,037
========
Identifiable assets at March 31, 1992 . . . $149,691 $31,476 $10,746 $ -- $191,913
======== ======= ======= ========
Corporate assets . . . . . . . . . . . . . 7,249
-------
Total assets at March 31, 1992 . . . . . . $199,162
========
45
</TABLE>
<PAGE> 46
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
NOTE 13 -- INTERNATIONAL OPERATIONS
The consolidated financial statements include the following with respect to the
net income and net assets of the Company's international subsidiaries and
branches during the three years ended March 31:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,694 $ 5,942 $ 4,382
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . $46,470 $46,631 $32,205
</TABLE>
NOTE 14 -- ACQUISITIONS AND DIVESTITURES
Effective March 1, 1992, the Company acquired, for $3 million in cash plus a
deferred payment provision of $2 million, the assets and business of Retail
Management Systems Corporation ("RMS"), a company that designs and integrates
software for the retail industry. The cash payment of $3 million was made
subsequent to March 31, 1992 and, accordingly, was classified as a current
liability as of that date. The acquisition was accounted for as a purchase,
and $4.4 million of the purchase price was allocated to software and has been
included in the other assets section of the consolidated balance sheet. These
intangible assets are being amortized on a straight-line basis over a 7 year
period.
Effective April 10, 1992, the Company acquired Telesystems SLW Inc.
("Telesystems") of Toronto, Ontario, Canada, a developer and supplier of
wireless data communications and local area networks using spread spectrum
radio technology. The purchase price consisted of approximately $2.6 million
in cash and 353,172 shares of the Company's Common Stock which is treated as a
non-cash item in the accompanying consolidated statement of cash flows. In
connection with the acquisition, the Company acquired approximately $3.5
million (U.S.) of Canadian federal tax non-capital loss carryforwards and $.3
million (U.S.) of investment tax credits which were used to reduce income
taxes payable and the goodwill relating to the acquisition. In addition, the
Company acquired a non-compete agreement with the founders of Telesystems for
which it paid $4.8 million in cash. The excess of the purchase price over the
fair value of the net assets acquired approximates $8.6 million, net of tax
credits utilized in fiscal 1994 of $.6 million, and is being amortized on a
straight-line basis over a ten year period. The acquisition was accounted for
as a purchase.
Effective February 2, 1993, the Company acquired the remaining 55% of the
common stock of Teletransaction for a purchase price of 720,000 shares of the
Company's Common Stock, which is treated as a non-cash item in the accompanying
consolidated statement of cash flows. The Company previously acquired 15% of
Teletransaction's common stock in March 1992 for $1.7 million and an additional
30% of Teletransaction's common stock in December 1992 for $3.0 million; these
investments were accounted for under the equity method prior to the acquisition
of the remaining shares of Teletransaction in February 1993. Teletransaction,
which was owned by Mr. Meyerson and members of his family as well as
Teletransaction employees prior to the acquisition, is the owner of
certain technology, product
46
<PAGE> 47
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
development and design rights related to portable pen-based products. The
common stock of the Company issued to shareholders of Teletransaction were at
the time of issuance subject to restrictions for periods ranging from 1 to 3
years. This business combination has been treated as a purchase and the
resulting goodwill of $13.3 million is included in the other assets caption of
the consolidated balance sheet and is being amortized on a straight-line basis
over a 5 year period.
Effective March 1, 1993, the Company acquired, for $3.0 million in cash plus a
deferred payment provision of $1.0 million, all of the common stock of Itronix,
a Washington corporation which designs and manufactures hand-held computers,
systems components and software for the mobile workforce and field service
markets. The cash purchase price was paid subsequent to March 31, 1993, and
accordingly, was classified as a current liability as of that date. The
acquisition was accounted for as a purchase, and the resulting goodwill of $2.5
million, net of goodwill adjustments of $1.1 million, is being amortized on a
straight-line basis, over a 10 year period.
The following unaudited proforma combined results of operations for the years
ended March 31, 1993 and March 31, 1992, assume the acquisitions of
Telesystems, Teletransaction and Itronix had occurred April 1, 1991. The
combined results below, which are based on various assumptions, are not
necessarily indicative of what would have occurred had the acquisitions been
consummated as of April 1, 1991.
<TABLE>
<CAPTION>
(Unaudited)
For the years ended March 31,
-----------------------------
1993 1992
----------- ----------
<S> <C> <C>
Total revenues $249,424 $228,314
Income (loss) before extraordinary
items and cumulative effect
of an accounting change (17,148) 9,772
Net income (loss) (17,587) 10,863
Net income (loss) per share $ (1.15) $ .72
</TABLE>
In May, 1990, the Company disposed of Information Management Group ("IMG"), an
operating division of the Company's Retail Automation Group, to Telxon's former
Vice President of Marketing. IMG, acquired in 1989, provided integrated retail
store management and corporate-level accounting software for IBM's 3X series
and A/S 400 computers. The Company incurred a loss of $4,577 on the sale which
was fully reserved as of March 31, 1990. IMG's revenues and operating loss
amounted to $1,558 and $2,224, respectively, in 1990.
During fiscal 1994, 1993 and 1992, the Company recorded royalty income
(expense) due from (to) IMG of $110, $(117) and $117, respectively.
NOTE 15 -- COMMITMENTS AND CONTINGENCIES
Pursuant to a Settlement Agreement dated November 4, 1988, between the Company
and Symbol Technologies, Inc. ("Symbol") relating to the termination of the
Company's tender offer to purchase all the common stock
47
<PAGE> 48
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
of MSI Data Corporation ("MSI"), the Company entered into an agreement, which
was amended and restated effective September 30, 1992, providing, among other
things, for the licensing of certain Symbol and MSI patented technologies for
specified royalties. Under the agreement as amended and restated, the Company
paid $2.8 million for certain license fees and is obligated to pay the
following ongoing royalties based on the sales value of Company products
incorporating the licensed technologies: (i) from 10% on the first $25 million
in cumulative sales, declining to 5% on cumulative sales in excess of $100
million, of products utilizing a MSI patent; and (ii) 7.5% on all sales of
products utilizing one or more of the Symbol patents.
In December 1992, four class action suits were filed in the United States
District Court, Northern District of Ohio, by certain alleged stockholders of
the Company on behalf of themselves and purported classes consisting of Telxon
stockholders, other than defendants and their affiliates, who purchased the
Company's common stock between May 20, 1992 and January 19, 1993. The named
defendants are the Company, former President and Chief Executive Officer
Raymond D. Meyo, and current President, Chief Operating Officer and Chief
Financial Officer Dan R. Wipff. On February 1, 1993, the plaintiffs filed
their Amended and Consolidated Class Action Complaint related to the four
actions, alleging claims for fraud on the market and negligent
misrepresentation, arising from alleged misrepresentations and omissions with
respect to the Company's financial performance and prospects, and alleged
trading activities of the named individual defendants. The Amended Complaint
seeks certification of the purported class, unspecified compensatory damages,
the imposition of a constructive trust on certain of the defendants' assets and
other unspecified extraordinary equitable and/or injunctive relief, interest,
attorneys' fees and costs. The defendants, including the Company, filed a
Motion to Dismiss which was denied by the court on June 3, 1993.
On April 16, 1993, Plaintiffs filed their Motion for Class Certification. The
defendants, including the Company, filed their briefs in opposition to Class
Certification on October 13, 1993. On December 17, 1993, the District Court
certified the class, consisting of Telxon stockholders, other than defendants
and their affiliates, who purchased Telxon common stock between May 20, 1992
and December 14, 1992. The defendants intend to vigorously defend this
Consolidated Class Action, however, the ultimate outcome of this litigation
cannot presently be determined. Accordingly, no provision for any liability
that may result from adjudication has been made in the accompanying
consolidated financial statements.
On September 21, 1993, a derivative Complaint was filed in the Court of
Chancery of the State of Delaware, in and for Newcastle County, by an alleged
stockholder of Telxon derivatively on behalf of Telxon. The named defendants
are the Company; Robert F. Meyerson, Chairman of the Board and Chief Executive
Officer; Dan R. Wipff, President, Chief Operating Officer and Chief Financial
Officer and director; Robert A. Goodman, Corporate Secretary and outside
director; Norton W. Rose, outside director and Dr. Raj Reddy, outside
director. The Complaint alleges breach of fiduciary
48
<PAGE> 49
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
duty to the Company and waste of the Company's assets in connection with
certain transactions entered into by Telxon and compensation amounts paid by
the Company. The Complaint seeks an accounting, injunction, rescission,
attorneys' fees and costs. On November 12, 1993, Telxon and the individual
director defendants filed a Motion to Dismiss. The plaintiff filed his brief
in opposition to the Motion on May 2, 1994. The defendants intend to file a
responsive final brief and to vigorously defend this action.
In the normal course of its operations, the Company is subject to performance
under contracts, and has various legal actions pending. However, in
management's opinion, any such outstanding matters have been reflected in the
consolidated financial statements, are covered by insurance or, would not have
a material adverse effect on the Company's consolidated financial position.
NOTE 16 -- QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
Quarter
---------------------------------------------------------------------
1994 First Second Third Fourth(a) Year
- ---- ------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . $56,541 $63,085 $76,968 $99,399 $295,993
Gross profit . . . . . . . . . . . . . . . . . . . . 24,445 25,436 31,870 38,937 120,688
Net income (loss) . . . . . . . . . . . . . . . . . $(1,977) $(1,090) $ (617) $ 885 $ (2,799)
======= ======= ======= ======= ========
Earnings per common and common equivalent share:
Net income (loss) per share . . . . . . . . . . . . $ (.13) $ (.07) $ (.04) $ .06 $ (.18)
======= ======= ======= ======= ========
</TABLE>
(a) During the fourth quarter of fiscal 1994, the Company recorded pretax
charges aggregating $3.4 million. These charges included $1.6 million
related to severance, $1.2 million related to inventory obsolescence
and $1.7 million related to physical inventory adjustments. These
charges were offset by miscellaneous adjustments increasing pretax
income of $1.1 million.
After the related income tax benefit, the aggregate impact on fourth
quarter earnings was $(2.1) million or $(.13) per share.
<TABLE>
<CAPTION>
Quarter
--------------------------------------------------------------
1993 First(a) Second Third(b) Fourth(c) Year
- ---- ------- ------ -------- --------- -------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . $67,412 $66,380 $48,910 $55,712 $238,414
Gross profit . . . . . . . . . . . . . . . . . . . . 26,854 26,964 16,544 14,585 84,947
</TABLE>
49
<PAGE> 50
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
<TABLE>
<CAPTION>
Quarter
------------------------------------------------------------
1993 First(a) Second Third(b) Fourth(c) Year
- ---- ------- ------ -------- --------- ------
<S> <C> <C> <C> <C> <C>
Income (loss) before cumu-
lative effect of an
accounting change . . . . . . . . . . . . . . . 4,372 3,504 (9,127) (10,374) (11,625)
Cumulative effect of a
change in accounting for
income taxes . . . . . . . . . . . . . . . . . . (439) -- -- -- (439)
------- ------- ------- -------- --------
Net income (loss) . . . . . . . . . . . . . . . . . . $ 3,933 $ 3,504 $(9,127) $(10,374) $(12,064)
======= ======= ======= ======== ========
Earnings per common and common
equivalent share:
Income (loss) before
cumulative effect of an
accounting change . . . . . . . . . . . . . . $ .30 $ .24 $(.63) $(.70) $(.79)
Cumulative effect of a change
in accounting for income
taxes . . . . . . . . . . . . . . . . . . . . (.03) -- -- -- (.03)
----- ----- ----- ----- -----
Net income (loss) per share . . . . . . . . . . . . . $ .27 $ .24 $ (.63) $ (.70) $ (.82)
======= ======= ======= ======== ========
</TABLE>
(a) As discussed in Note 1, the Company adopted the provisions of SFAS No.
109 during the fourth quarter of fiscal 1993, effective April 1, 1992.
As a result, the first quarter has been restated to reflect the
cumulative effect adjustment of $.4 million.
During the third quarter of fiscal 1993, the Company recognized the
following pre-tax provisions for restructuring and other non-
recurring charges aggregating $11.4 million and consisting of:
inventory obsolescence of $3.1 million, severance costs of $3.8
million, provision for bad debts and credits granted on sales of $1.8
million, compensation expense related to restricted stock awards of
$1.0 million, and miscellaneous charges of $1.7 million.
After the related income tax benefit, the aggregate impact on earnings
for the first three quarters of fiscal 1993 was $(7.8) million or
$(.53) per share.
(b) During the fourth quarter of fiscal 1993, the Company recognized
pre-tax provisions for restructuring and other non-recurring charges
aggregating $11.3 million. These charges were primarily related to
the following items: inventory obsolescence of $4.5 million,
relocation and severance costs of $3.7 million, professional fees of
$2.2 million, and miscellaneous charges of $.9 million.
After the related income tax benefit, the aggregate impact on fourth
quarter earnings was $(7.8) million or $(.53) per share.
50
<PAGE> 51
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
Not applicable.
PART III
Except for certain information relating to the Company's Executive Officers
included in Part I of this Form 10-K, the information called for by this Part
III is not set forth herein but is incorporated by reference from the
definitive proxy statement which the Company intends to file with the
Securities and Exchange Commission within 120 days of the close of its fiscal
year ended March 31, 1994, with respect to the 1994 Annual Meeting of the
Company's Stockholders scheduled to be held August 19, 1994, or will otherwise
be timely filed.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Report:
1. Consolidated Financial Statements: Reference is made to
the Index on Page 26 herein.
2. Financial Statement Schedules: Reference is made to the
Index on Page 26 herein. All other schedules are
omitted because they are not applicable or the required
information is shown in the financial statements or the
notes thereto.
3. Exhibits.
(b) The Company did not file a Form 8-K during its last quarter of
fiscal 1994.
(3) EXHIBITS
3.1 Restated Certificate of Incorporation of
Registrant, incorporated by reference to Exhibit
No. 3.1 to Registrant's Form 10-K filed for the
year ended March 31, 1993.
3.2 Amended and Restated By-Laws of Registrant,
incorporated by reference to Exhibit No. 3.2 to
Registrant's Form 10-K filed for the year ended
March 31, 1993.
3.2.1 Amendment and Restatement of Article
III of the Amended By-Laws of
Registrant dated July 23, 1989,
incorporated by reference to Exhibit
No. 19.ii.1 to Registrant's Form
10-Q filed for the quarter ended
September 30, 1989.
4.1 Portions of the Restated Certificate of
Incorporation of Registrant pertaining to the
rights of holders of Registrant's Common Stock, par
value $.01 per share incorporated by reference to
Exhibit 3.1 to Registrant's Annual Report on Form
10-K for the year ended March 31, 1993.
51
<PAGE> 52
4.2 Form of Certificate for the Registrant's Common
Stock, par value $.01 per share, incorporated
herein by reference to Exhibit 4.2 to Registrant's
Form 10-K filed for the year ended March 31, 1990.
4.3 Form of Rights Agreement between Registrant and
AmeriTrust Company National Association, as Rights
Agent, dated as of August 25, 1987, incorporated
herein by reference to Exhibit 2(c) to Amendment
No. 1, dated May 21, 1992, to Registrant's
Registration Statement on Form 8-A, filed December
19, 1983, with respect to Registrant's Common
Stock.
4.3.1 Form of Rights Certificate (included
as Exhibit A to the Rights Agreement
included as Exhibit 4.3 to the
Annual Report on Form 10-K). Until
the Distribution Date (as defined in
the Rights Agreement), the Rights
Agreement provides that the common
stock purchase rights created
thereunder are evidenced by the
certificates for Registrant's Common
Stock (the form of which is included
as Exhibit 4.3 to this Annual Report
on Form 10-K, which stock
certificates are deemed also to be
certificates for such common stock
purchase rights) and not by separate
Rights Certificates; as soon as
practicable after the Distribution
Date, Rights Certificates will be
mailed to each holder of
Registrant's Common Stock as of the
close of business on the
Distribution Date.
4.4 Form of Indenture by and between the Registrant and
AmeriTrust Company National Association, as
Trustee, dated as of June 1, 1987, regarding
Registrant's 7-1/2% Convertible Subordinated
Debentures Due 2012, incorporated herein by
reference to Exhibit 4.2 to Registrant's
Registration Statement on Form S-3, Registration
No. 33-14348, filed May 18, 1987.
4.4.1 Form of the Registrant's 7-1/2%
Convertible Subordinated Debentures
Due 2012 (set forth in the form of
Indenture included as Exhibit 4.4 to
this Annual Report on Form 10-K).
10.1 Compensation and Benefits Plans of the Registrant.
10.1.1 Amended and Restated Retirement and
Uniform Matching Profit-Sharing Plan
of Registrant, effective July 1,
1993, filed herewith.
10.1.1.a Amendment, dated
January 1, 1994, filed
herewith.
10.1.1.b Amendment, dated April 1,
1994, filed herewith.
10.1.2 1988 Stock Option Plan of Registrant,
filed herewith.
10.1.2.a Amendment, dated
January 31, 1990, filed
herewith.
52
<PAGE> 53
10.1.3 1990 Stock Option Plan of the
Registrant, as amended, filed
herewith.
10.1.4 1990 Stock Option Plan of the
Registrant for non-employee
directors, as amended, filed
herewith.
10.1.5 Non-Qualified Stock Option Agreement
between the Registrant and Dan R.
Wipff, dated October 17, 1988, filed
herewith.
10.1.6 Non-Qualified Stock Option Agreement
between the Registrant and Raj
Reddy, dated as of October 17, 1988,
filed herewith.
10.1.7 Description of compensation
arrangements between the Registrant
and Robert F. Meyerson, Chairman of
the Board of Registrant,
incorporated herein by reference to
Exhibit 10.14 to Registrant's Form
10-K filed for the year ended March
31, 1990.
10.1.8 Employment Agreement between the
Registrant and Dan R. Wipff, dated
as of April 1, 1991, incorporated
herein by reference to Exhibit 19.02
to Registrant's Form 10-Q filed for
the quarter ended September 30,
1991.
10.1.9 Consulting Agreement between the
Registrant and Accipiter
Corporation, dated March 6, 1992,
incorporated herein by reference to
Exhibit 10.17 to the Registrant's
Form 10-K filed for the year ended
March 31, 1992.
10.1.10 Services and Non-Competition
Agreement, dated as of January 18,
1993, among Accipiter Corporation,
Robert F. Meyerson and the
Registrant, incorporated herein by
reference to Exhibit 10.28 to the
Registrant's Form 10-Q filed for the
quarter ended December 31, 1992.
10.1.11 Employment Agreement between the
Registrant and John H. Cribb
effective as of April 1, 1993, filed
herewith.
10.1.12 Severance and Settlement Agreement,
dated as of December 23, 1992,
between the Registrant and Raymond
D. Meyo, incorporated herein by
reference to Exhibit 10.26 to the
Registrant's Form 10-Q filed for
the quarter ended December 31,
1992.
10.1.13 Consulting Agreement, dated as of
December 23, 1992, between the
Registrant and Raymond D. Meyo,
incorporated herein by reference to
Exhibit 10.26 to the Registrant's
Form 10-Q filed for the quarter
ended December 31, 1992.
53
<PAGE> 54
10.1.14 Employment Agreement between the
Registrant and D. Michael Grimes,
dated as of February 25, 1993,
incorporated herein by reference to
Exhibit 10.1.14 to the Registrant's
Form 10-K filed for the year ended
March 31, 1993.
10.1.15 Employment Agreement between the
Registrant and William J. Murphy,
dated as of March 12, 1993,
incorporated herein by reference to
Exhibit 10.1.15 to the Registrant's
Form 10-K filed for the year ended
March 31, 1993.
10.1.16 Employment Agreement among the
Registrant, Itronix Corporation, a
wholly owned subsidiary of the
Registrant, and Lawrence L. Allman,
dated as of April 12, 1993,
incorporated herein by reference to
Exhibit 10.1.16 to the Registrant's
Form 10-K filed for the year ended
March 31, 1993.
10.1.16.a Agreement to amend and
restate Allman Employment
Agreement between the
Registrant and Lawrence
Allman, filed herewith.
10.1.17 1992 Restricted Stock Plan of the
Registrant, incorporated herein by
reference to Exhibit 10.1.17 to the
Registrant s Form 10-Q filed for the
quarter ended December 31, 1993.
10.1.17.a Amendment, dated
December 7, 1993,
incorporated herein by
reference to Exhibit
10.1.17.a to the
Registrant's Form 10-Q
filed for the quarter
ended December 31, 1993.
10.2 Material Leases of the Registrant.
10.2.1 Lease between Registrant and 3330 W.
Market Properties, dated as of
December 30, 1986, filed herewith.
10.2.2 Lease between Itronix, a
wholly-owned subsidiary of the
Registrant, and Hutton Settlement,
Inc., dated as of April 5, 1993,
incorporated herein by reference to
Exhibit 10.2.3 to the Registrant's
Form 10-K filed for the year ended
March 31, 1993.
10.3 Credit Agreements of the Registrant.
10.3.1 Revolving Credit, Term Loan and
Security Agreement between the
Registrant and the Bank of New York
Commercial Corporation dated as of
October 20, 1993, incorporated by
reference to Exhibit 10.3 to the
Registrant's Form 10-Q filed for the
quarter ended September 30, 1993.
10.3.1.a First Amendment to
Revolving Credit, Term Loan
and Security Agreement
between the Registrant and
the Bank of New York
Commercial Corporation
dated as of March 30,
1994, filed herewith.
54
<PAGE> 55
10.3.1.b Second Amendment to
Revolving Credit, Term Loan
and Security Agreement
between the Registrant and
Bank of New York Commercial
Corporation dated as of June
10, 1994, filed herewith.
10.4 Amended and Restated Agreement between the
Registrant and Symbol Technologies, Inc., dated as
of September 30, 1992, incorporated herein by
reference to Exhibit 10.4 to Registrant's Form 10-K
for the year ended March 31, 1993.
10.5 Stock Purchase Agreement by and among the
Registrant, Robert F. Meyerson and members of the
Meyerson family dated as of March 18, 1992,
incorporated herein by reference to Exhibit 10.22
to the Registrant's Form 10-K filed for the year
ended March 31, 1992.
10.6 Stock Purchase Agreement, dated December 31, 1992,
among the Registrant, Robert F. Meyerson and
certain members of Mr. Meyerson's family,
incorporated herein by reference to Exhibit 10.30
to the Registrant's Form 10-Q filed for the quarter
ended December 31, 1992.
10.7 Plan and Agreement of Merger, dated as of January
18, 1993, among the Registrant, WSACO, Inc. and
Teletransaction, Inc., incorporated herein by
reference to Exhibit 10.29 to the Registrant's Form
10-Q filed for the quarter ended December 31, 1992.
10.7.1 Notice of Termination by WSACO, Inc.,
as contemplated by Section 5.7 of the
Plan and Agreement of Merger, of Amended
and Restated Consulting Agreement between
Accipiter Corporation and Teletransaction,
Inc., incorporated herein by reference
to Exhibit 10.7.1 to Registrant's Form
10-K for the year ended March 31, 1993.
10.8 Asset Purchase Agreement between the Registrant and
Retail Management Systems Corporation, dated as of
April 3, 1992, incorporated herein by reference to
Exhibit 10.23 to the Registrant's Form 10-K filed
for the year ended March 31, 1992.
10.9 Stock Purchase Agreement among the Registrant and
the stockholders of Telesystems SLW Inc., dated as
of April 10, 1992, relating to the acquisition of
all the capital stock of Telesystems SLW Inc.,
incorporated herein by reference to Exhibit 10.24
to the Registrant's Form 10-K filed for the year
ended March 31, 1992.
10.10 Agreement of Merger among the Registrant,
Itracquico Corporation and Itronix Corporation
dated as of March 22, 1993, incorporated herein by
reference to Exhibit 10.10 to the Registrant's Form
10-K for the year ended March 31, 1993.
10.11 Agreement for Sale and Licensing of Assets between
AST Research, Inc. and PenRight! Corporation, a
wholly-owned subsidiary of the Registrant, dated as
of January 26, 1994, incorporated herein by
reference to Exhibit 10.11 to the Registrant's Form
10-Q for the quarter ended December 31, 1993.
55
<PAGE> 56
11. Computation of Common Shares outstanding and
earnings per share for fiscal years ended 1994,
1993 and 1992, filed herewith.
21. Subsidiaries of the Registrant, filed herewith.
24. Consent of Coopers & Lybrand, filed herewith.
25. Powers of Attorney executed by members of the Board
of Directors, filed herewith.
56
<PAGE> 57
TELXON CORPORATION AND SUBSIDIARIES
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Dollars in Thousands
<TABLE>
<CAPTION>
Deductions
-----------------------
Balance at
Year Ended Beginning Amounts Amounts Balance at the
March 31 Name of Debtor of Period Additions Collected Written-Off End of Period
- ----------- -------------- ----------- --------- ---------- ---------------- ---------------
Not
Current Current
------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 Frank E. Brick $ -- $134 (c) $ -- $ -- $ 45 $ 89
William J. Murphy $200 $ -- (a) $ -- $ -- $200 $ --
1993 William J. Murphy $ -- $200 (a) $ -- $ -- $ -- $200
1992 Robert F. Meyerson $167 $ 13 (b) $180 $ -- $ -- $ --
Raymond D. Meyo $112 $ 9 (c) $121 $ -- $ -- $ --
Dan R. Wipff $121 $ 18 (c) $139 $ -- $ -- $ --
</TABLE>
(a) Represents non-interest bearing promissory note due on or before April
1, 1994 as authorized per employment agreement.
(b) Represented expenses paid by the Company on behalf of the employee and
interest calculated at the rate charged by the Company's primary
domestic lender.
(c) Represented advances against bonus compensation and loan as authorized
per employment agreement. Amount also included interest on any
outstanding loan for taxes at the rate charged by the Company's
primary domestic lender.
57
<PAGE> 58
TELXON CORPORATION AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Dollars in Thousands
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning of Charged to End of
Description Period Costs and Expenses Deductions Period
- ----------- ------------- ------------------ ------------ --------
<S> <C> <C> <C> <C>
Valuation account for accounts
receivable:
Year ended March 31, 1994: $2,689 $ 817 $1,871 (a) $1,635
Year ended March 31, 1993: $1,321 $2,745 $1,377 (a) $2,689
Year ended March 31, 1992: $1,483 $ 458 $ 620 (a) $1,321
Valuation account for inventory:
Year ended March 31, 1994: $7,486 $6,674 $4,310 (b) $9,850
Year ended March 31, 1993: $4,356 $9,700 $6,570 (b) $7,486
Year ended March 31, 1992: $4,242 $1,492 $1,378 (b) $4,356
</TABLE>
(a) Doubtful accounts charged off, net of recoveries.
(b) Write off of excess and/or obsolete material.
58
<PAGE> 59
TELXON CORPORATION AND SUBSIDIARIES
SCHEDULE IX
SHORT-TERM BORROWINGS
Dollars in Thousands
<TABLE>
<CAPTION>
Maximum Average Weighted
Weighted Amount Amounts Average
Year Category of Balance at Average Outstanding Outstanding Interest Rate
Ended Aggregate Short-Term End of Interest During the During the During the
March 31, Borrowings Period Rate(a) Period Period(b) Period(c)
- --------- --------------------- ---------- --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
1994 Notes payable to banks $24,573 7.08% $24,573 $4,140 7.0%
1993 Notes payable to banks (d) $ -- N.A. $ 2,000 $ 159 6.0%
Notes payable to banks (e) $ -- N.A. $ 927 $ 918 10.375%
1992 Notes payable to Govern-
mental Agencies (f) $ 337 N.A. $ 337 $ 337 11.0%
Notes payable to banks (e) $ 935 10.375% $ 985 $ 899 10.7%
</TABLE>
(a) The averages were computed based on the annualized interest rate of all
debt outstanding at period end.
(b) These averages were based upon the monthly weighted averages of
short-term borrowings outstanding.
(c) These averages were computed by dividing the total interest on short-term
borrowings for the period or period in which the borrowing was
outstanding by the average amount of short-term borrowings outstanding
during the period and does not give consideration to foreign currency
fluctuations.
(d) Represents U.S. loan from December 31, 1992 to January 29, 1993.
(e) Represents non-U.S. dollar denomination borrowings by international
subsidiaries guaranteed by the parent company.
(f) Assumed on March 1, 1992, as part of RMS acquisition.
59
<PAGE> 60
TELXON CORPORATION AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Dollars in Thousands
<TABLE>
<CAPTION>
Item Charged to Costs and Expenses
- -----------------------------------------
Year Ended March 31,
--------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Advertising costs $4,300 $4,352 $3,897
Taxes, other than payroll and income taxes $3,180 * *
Maintenance and repairs * * *
Royalties $8,387 $5,976 $2,975
</TABLE>
* Disclosure not required because expenditures were less than 1% of
revenues for these periods.
60
<PAGE> 61
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TELXON CORPORATION
Date: June 28, 1994 By: /s/ Dan R. Wipff
---------------------------------
Dan R. Wipff, President,
Chief Operating Officer and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated. This report may
be signed in multiple counterparts, all of which taken together shall
constitute a single document.
<TABLE>
<S> <C> <C>
President,
Chief Operating Officer
/s/ Dan R. Wipff and Chief Financial Officer June 28, 1994
- ------------------------------ (principal financial and
Dan R. Wipff accounting officer)
and Director
Chairman of the Board
/s/ Robert F. Meyerson and Chief Executive Officer June 28, 1994
- ----------------------------- (principal executive officer)
Robert F. Meyerson and Director
* Dr. Raj Reddy Director June 28, 1994
- -----------------------------
Dr. Raj Reddy
* Robert A. Goodman Director June 28, 1994
- -----------------------------
Robert A. Goodman
* Norton W. Rose Director June 28, 1994
- -----------------------------
Norton W. Rose
* J. Robert Anderson Director June 28, 1994
- -----------------------------
J. Robert Anderson
* Dr. Walter J. Salmon Director June 28, 1994
- -----------------------------
Dr. Walter J. Salmon
</TABLE>
* The undersigned, by signing his name hereto, does sign and
execute this Form 10-K Report pursuant to Powers of Attorney which were filed
with the Securities and Exchange Commission on behalf of the Directors or for
which Powers of Attorney are herewith filed unless otherwise indicated by
manual signature on this Form 10-K Report.
Date: June 28, 1994 * By: /s/ Dan R. Wipff
--------------------------------------
Dan R. Wipff, Attorney-in-fact
61
<PAGE> 62
TELXON CORPORATION
EXHIBITS TO
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 1994
62
<PAGE> 63
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
* 3.1 Restated Certificate of Incorporation of Registrant, incorporated by reference to Exhibit No. 3.1 to
Registrant's Form 10-K filed for the year ended March 31, 1993.
* 3.2 Amended and Restated By-Laws of Registrant, incorporated by reference to Exhibit No. 3.2 to Registrant's
Form 10-K filed for the year ended March 31, 1993.
* 3.2.1 Amendment and Restatement of Article III of the Amended By-Laws of Registrant dated July 23,
1989, incorporated by reference to Exhibit No. 19.ii.1 to Registrant s Form 10-Q filed for the
quarter ended September 30, 1989.
* 4.1 Portions of the Restated Certificate of Incorporation of Registrant pertaining to the rights of holders of
Registrant's Common Stock, par value $.01 per share incorporated by reference to Exhibit 3.1 to
Registrant's Annual Report on Form 10-K for the year ended March 31, 1993.
* 4.2 Form of Certificate for the Registrant's Common Stock, par value $.01 per share, incorporated herein by
reference to Exhibit 4.2 to Registrant's Form 10-K filed for the year ended March 31, 1990.
* 4.3 Form of Rights Agreement between Registrant and AmeriTrust Company National Association, as Rights
Agent, dated as of August 25, 1987, incorporated herein by reference to Exhibit 2(c) to Amendment No. 1,
dated May 21, 1992, to Registrant's Registration Statement on Form 8-A, filed December 19, 1983, with
respect to Registrant's Common Stock.
* 4.3.1 Form of Rights Certificate (included as Exhibit A to the Rights Agreement included as Exhibit
4.3 to the Annual Report on Form 10-K). Until the Distribution Date (as defined in the Rights
Agreement), the Rights Agreement provides that the common stock purchase rights created
thereunder are evidenced by the certificates for Registrant's Common Stock (the form of which
is included as Exhibit 4.3 to this Annual Report on Form 10-K, which stock certificates are
deemed also to be certificates for such common stock purchase rights) and not by separate
Rights Certificates; as soon as practicable after the Distribution Date, Rights Certificates
will be mailed to each holder of Registrant's Common Stock as of the close of business on the
Distribution Date.
</TABLE>
63
<PAGE> 64
<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
* 4.4 Form of Indenture by and between the Registrant and AmeriTrust Company National Association, as Trustee,
dated as of June 1, 1987, regarding Registrant's 7-1/2% Convertible Subordinated Debentures Due 2012,
incorporated herein by reference to Exhibit 4.2 to Registrant's Registration Statement on Form S-3,
Registration No. 33-14348, filed May 18, 1987.
* 4.4.1 Form of the Registrant's 7-1/2% Convertible Subordinated Debentures Due 2012 (set forth in the form
of Indenture included as Exhibit 4.4 to this Annual Report on Form 10-K).
10.1 Compensation and Benefits Plans of the Registrant.
10.1.1 Amended and Restated Retirement and Uniform Matching Profit-Sharing Plan of Registrant, effective
July 1, 1993, filed herewith.
10.1.1.a Amendment, dated January 1, 1994, filed herewith.
10.1.1.b Amendment, dated April 1, 1994, filed herewith.
10.1.2 1988 Stock Option Plan of Registrant, filed herewith.
10.1.2.a Amendment, dated January 31, 1990, filed herewith.
10.1.3 1990 Stock Option Plan of the Registrant, as amended, filed herewith.
10.1.4 1990 Stock Option Plan of the Registrant for non-employee directors, as amended, filed herewith.
10.1.5 Non-Qualified Stock Option Agreement between the Registrant and Dan R. Wipff, dated October 17,
1988, filed herewith.
10.1.6 Non-Qualified Stock Option Agreement between the Registrant and Raj Reddy, dated as of October 17,
1988, filed herewith.
* 10.1.7 Description of compensation arrangements between the Registrant and Robert F. Meyerson, Chairman of
the Board of Registrant, incorporated herein by reference to Exhibit 10.14 to Registrant's Form
10-K filed for the year ended March 31, 1990.
* 10.1.8 Employment Agreement between the Registrant and Dan R. Wipff, dated as of April 1, 1991,
incorporated herein by reference to Exhibit 19.02 to Registrant's Form 10-Q filed for the quarter
ended September 30, 1991.
</TABLE>
64
<PAGE> 65
<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
* 10.1.9 Consulting Agreement between the Registrant and Accipiter Corporation, dated March 6, 1992, incorporated
herein by reference to Exhibit 10.17 to the Registrant's Form 10-K filed for the year ended March 31, 1992.
* 10.1.10 Services and Non-Competition Agreement, dated as of January 18, 1993, among Accipiter Corporation, Robert
F. Meyerson and the Registrant, incorporated herein by reference to Exhibit 10.28 to the Registrant's
Form 10-Q filed for the quarter ended December 31, 1992.
10.1.11 Employment Agreement between the Registrant and John H. Cribb effective as of April 1, 1993, filed
herewith.
* 10.1.12 Severance and Settlement Agreement, dated as of December 23, 1992, between the Registrant and Raymond D.
Meyo, incorporated herein by reference to Exhibit 10.26 to the Registrant's Form 10-Q filed for the
quarter ended December 31, 1992.
* 10.1.13 Consulting Agreement, dated as of December 23, 1992, between the Registrant and Raymond D. Meyo,
incorporated herein by reference to Exhibit 10.26 to the Registrant's Form 10-Q filed for the quarter
ended December 31, 1992.
* 10.1.14 Employment Agreement between the Registrant and D. Michael Grimes, dated as of February 25, 1993,
incorporated herein by reference to Exhibit 10.1.14 to the Registrant's Form 10-K filed for the year
ended March 31, 1993.
* 10.1.15 Employment Agreement between the Registrant and William J. Murphy, dated as of March 12, 1993,
incorporated herein by reference to Exhibit 10.1.15 to the Registrant's Form 10-K filed for the year
ended March 31, 1993.
* 10.1.16 Employment Agreement among the Registrant, Itronix Corporation, a wholly owned subsidiary of the
Registrant, and Lawrence L. Allman, dated as of April 12, 1993, incorporated herein by reference to
Exhibit 10.1.16 to the Registrant's Form 10-K filed for the year ended March 31, 1993.
10.1.16.a Agreement to amend and restate Allman Employment Agreement between the Registrant
and Lawrence L. Allman, filed herewith.
</TABLE>
65
<PAGE> 66
<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
* 10.1.17 1992 Restricted Stock Plan of the Registrant, incorporated herein by reference to
Exhibit 10.1.17 to the Registrant's Form 10-Q filed for the quarter ended December 31,
1993.
* 10.1.17.a Amendment, dated December 7, 1993, incorporated herein by reference to
Exhibit 10.1.17.a to the Registrant's Form 10-Q filed for the quarter
ended December 31, 1993.
10.2 Material Leases of the Registrant.
10.2.1 Lease between Registrant and 3330 W. Market Properties, dated as of December 30, 1986,
filed herewith.
* 10.2.2 Lease between Itronix, a wholly-owned subsidiary of the Registrant, and Hutton
Settlement, Inc., dated as of April 5, 1993, incorporated herein by reference to
Exhibit 10.2.3 to the Registrant's Form 10-K filed for the year ended March 31, 1993.
10.3 Credit Agreements of the Registrant.
* 10.3.1 Revolving Credit, Term Loan and Security Agreement between the Registrant and the Bank
of New York Commercial Corporation dated as of October 20, 1993, incorporated by
reference to Exhibit 10.3 to the Registrant's Form 10-Q filed for the quarter ended
September 30, 1993.
10.3.1.a First Amendment to Revolving Credit, Term Loan and Security Agreement
between the Registrant and the Bank of New York Commercial Corporation
dated as of March 30, 1994, filed herewith.
10.3.1.b Second Amendment to Revolving Credit, Term Loan and Security agreement
between the Registrant and Bank of New York Commercial Corporation dated
as of June 10, 1994, filed herewith.
* 10.4 Amended and Restated Agreement between the Registrant and Symbol Technologies, Inc., dated as of
September 30, 1992, incorporated herein by reference to Exhibit 10.4 to Registrant's Form 10-K for the
year ended March 31, 1993.
* 10.5 Stock Purchase Agreement by and among the Registrant, Robert F. Meyerson and members of the Meyerson family
dated as of March 18, 1992, incorporated herein by reference to Exhibit 10.22 to the Registrant's Form
10-K filed for the year ended March 31, 1992.
</TABLE>
66
<PAGE> 67
<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
* 10.6 Stock Purchase Agreement, dated December 31, 1992, among the Registrant, Robert F. Meyerson and
certain members of Mr. Meyerson's family, incorporated herein by reference to Exhibit 10.30 to the
Registrant's Form 10-Q filed for the quarter ended December 31, 1992.
* 10.7 Plan and Agreement of Merger, dated as of January 18, 1993, among the Registrant, WSACO, Inc. and
Teletransaction, Inc., incorporated herein by reference to Exhibit 10.29 to the Registrant's Form 10-Q
filed for the quarter ended December 31, 1992.
* 10.7.1 Notice of Termination by WSACO, Inc., as contemplated by Section 5.7 of the Plan and
Agreement of Merger, of Amended and Restated Consulting Agreement between Accipiter
Corporation and Teletransaction, Inc., incorporated herein by reference to Exhibit 10.7.1
to Registrant's Form 10-K for the year ended March 31, 1993.
* 10.8 Asset Purchase Agreement between the Registrant and Retail Management Systems Corporation, dated as of
April 3, 1992, incorporated herein by reference to Exhibit 10.23 to the Registrant's Form 10-K filed
for the year ended March 31, 1992.
* 10.9 Stock Purchase Agreement among the Registrant and the stockholders of Telesystems SLW Inc., dated as of
April 10, 1992, relating to the acquisition of all the capital stock of Telesystems SLW Inc.,
incorporated herein by reference to Exhibit 10.24 to the Registrant's Form 10-K filed for the year
ended March 31, 1992.
* 10.10 Agreement of Merger among the Registrant, Itracquico Corporation and Itronix Corporation dated as of
March 22, 1993, incorporated herein by reference to Exhibit 10.10 to the Registrant's Form 10-K for
the year ended March 31, 1993.
* 10.11 Agreement for Sale and Licensing of Assets between AST Research, Inc. and PenRight! Corporation, a
wholly-owned subsidiary of the Registrant, dated as of January 26, 1994, incorporated herein by
reference to Exhibit 10.11 to the Registrant's Form 10-Q for the quarter ended December 31, 1993.
11. Computation of Common Shares outstanding and earnings per share for fiscal years ended 1994, 1993 and
1992, filed herewith.
21. Subsidiaries of the Registrant, filed herewith.
24.1 Consent of Coopers & Lybrand, filed herewith.
25. Powers of Attorney executed by members of the Board of Directors, filed herewith.
</TABLE>
* Previously filed
67
<PAGE> 1
EXHIBIT 10.1.1
TELXON'S RETIREMENT & UNIFORM
MATCHING PROFIT SHARING PLAN
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS 22
2.2 DETERMINATION OF TOP HEAVY STATUS 22
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER 26
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY 27
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES 28
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR 28
2.7 RECORDS AND REPORTS 30
2.8 APPOINTMENT OF ADVISERS 30
2.9 INFORMATION FROM EMPLOYER 30
2.10 PAYMENT OF EXPENSES 30
2.11 MAJORITY ACTIONS 31
2.12 CLAIMS PROCEDURE 31
2.13 CLAIMS REVIEW PROCEDURE 31
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY 32
3.2 APPLICATION FOR PARTICIPATION 32
3.3 EFFECTIVE DATE OF PARTICIPATION 32
3.4 DETERMINATION OF ELIGIBILITY 33
<PAGE> 3
3.5 TERMINATION OF ELIGIBILITY 33
3.6 OMISSION OF ELIGIBLE EMPLOYEE 33
3.7 INCLUSION OF INELIGIBLE EMPLOYEE 34
3.8 ELECTION NOT TO PARTICIPATE 34
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION 34
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION 35
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION 39
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS 40
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS 45
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS 48
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS 51
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS 55
4.9 MAXIMUM ANNUAL ADDITIONS 58
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS 63
4.11 TRANSFERS FROM QUALIFIED PLANS 64
4.12 VOLUNTARY CONTRIBUTIONS 66
4.13 DIRECTED INVESTMENT ACCOUNT 67
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND 68
5.2 METHOD OF VALUATION 68
<PAGE> 4
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT 69
6.2 DETERMINATION OF BENEFITS UPON DEATH 69
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY 71
6.4 DETERMINATION OF BENEFITS UPON TERMINATION 71
6.5 DISTRIBUTION OF BENEFITS 76
6.6 DISTRIBUTION OF BENEFITS UPON DEATH 81
6.7 TIME OF SEGREGATION OR DISTRIBUTION 84
6.8 DISTRIBUTION FOR MINOR BENEFICIARY 84
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN 84
6.10 PRE-RETIREMENT DISTRIBUTION 85
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP 85
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION 87
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE 88
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE 88
7.3 OTHER POWERS OF THE TRUSTEE 89
7.4 LOANS TO PARTICIPANTS 94
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS 96
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES 96
7.7 ANNUAL REPORT OF THE TRUSTEE 96
7.8 AUDIT 97
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE 98
7.10 TRANSFER OF INTEREST 99
<PAGE> 5
7.11 DIRECT ROLLOVER 99
7.12 AFFILIATED COMPANY
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT 102
8.2 TERMINATION 103
8.3 MERGER OR CONSOLIDATION 103
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS 104
9.2 ALIENATION 104
9.3 CONSTRUCTION OF PLAN 105
9.4 GENDER AND NUMBER 105
9.5 LEGAL ACTION 105
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS 106
9.7 BONDING 106
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE 107
9.9 INSURER'S PROTECTIVE CLAUSE 107
9.10 RECEIPT AND RELEASE FOR PAYMENTS 107
9.11 ACTION BY THE EMPLOYER 107
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY 108
9.13 HEADINGS 108
9.14 APPROVAL BY INTERNAL REVENUE SERVICE 109
9.15 UNIFORMITY 109
<PAGE> 6
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ADOPTION BY OTHER EMPLOYERS 109
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS 110
10.3 DESIGNATION OF AGENT 111
10.4 EMPLOYEE TRANSFERS 111
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION 111
10.6 AMENDMENT 112
10.7 DISCONTINUANCE OF PARTICIPATION 112
10.8 ADMINISTRATOR'S AUTHORITY 112
<PAGE> 7
TELXON'S RETIREMENT & UNIFORM
MATCHING PROFIT SHARING PLAN
THIS AGREEMENT, hereby made and entered into this
_________ day of __________________________, 19____, by and
between Telxon Corp. (herein referred to as the "Employer") and
Charles Schwab Trust Company (herein referred to as the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Employer heretofore established a Profit
Sharing Plan and Trust effective April 1, 1985, (hereinafter
called the "Effective Date") known as Telxon's Retirement &
Uniform Matching Profit Sharing Plan (herein referred to as the
"Plan") in recognition of the contribution made to its successful
operation by its employees and for the exclusive benefit of its
eligible employees; and
WHEREAS, under the terms of the Plan, the Employer has
the ability to amend the Plan, provided the Trustee joins in such
amendment if the provisions of the Plan affecting the Trustee are
amended;
NOW, THEREFORE, effective January 1, 1993, except as
otherwise provided, the Employer and the Trustee in accordance
with the provisions of the Plan pertaining to amendments thereof,
hereby amend the Plan in its entirety and restate the Plan to
provide as follows:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act
of 1974, as it may be amended from time to time.
1.2 "Administrator" means the person designated by the
Employer pursuant to Section 2.4 to administer the Plan on behalf
of the Employer.
1.3 "Affiliated Employer" means any corporation which is a
member of a control led group of corporations (as defined in Code
Section 414(b)) which includes the Employer; any trade or
business (whether or not incorporated) which is under common
control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member
of an affiliated service group (as defined in Code Section
414(m)) which includes the Employer; and any other entity
required to be aggregated with the Employer pursuant to
Regulations under Code Section 414(o).
<PAGE> 8
1.4 "Aggregate Account" means, with respect to each
Participant, the value of all accounts maintained on behalf of a
Participant, whether attributable to Employer or Employee
contributions, subject to the provisions of Section 2.2.
1.5 "Anniversary Date" means December 31st.
1.6 "Beneficiary" means the person to whom the share of a
deceased Participant's total account is payable, subject to the
restrictions of Sections 6.2 and 6.6.
1.7 "Code" means the Internal Revenue Code of 1986, as
amended or replaced from time to time.
1.8 "Compensation" with respect to any Participant means
such Participant's wages, salaries, fees for professional
services and other amounts received (without regard to whether or
not an amount is paid in cash) for personal services actually
rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are
includible in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the basis
of a percentage of profits, commissions on insurance premiums,
tips, bonuses, fringe benefits, and reimbursements or other
expense allowances under a nonaccountable plan (as described in
Regulation 1.62-2(c)) for a Plan Year.
Compensation shall exclude (a)(1) contributions made by
the Employer to a plan of deferred compensation to the extent
that, the contributions are not includible in the gross income of
the Participant for the taxable year in which contributed, (2)
Employer contributions made on behalf of an Employed to a
simplified employee pension plan described in Code Section 408(k)
to the extent such contributions are excludable from the
Employee's gross income, (3) any distributions from a plan of
deferred compensation; (b) amounts realized from the exercise of
a non-qualified stock option, or when restricted stock (or
property) held by an Employee either becomes freely transferable
or is no longer subject to a substantial risk of forfeiture; (c)
amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and (d) other
amounts which receive special tax benefits, or contributions made
by the Employer (whether or not under a salary reduction
agreement) towards the purchase of any annuity contract described
in Code Section 403(b) (whether or not the contributions are
actually excludable from the gross income of the Employee).
2
<PAGE> 9
For purposes of this Section, the determination of
Compensation shall be made by:
(a) excluding taxable fringe benefits, including
any bonus paid to an employee intended as a
reimbursement for taxes paid by the employee on any
taxable fringe benefits.
(b) including amounts which are contributed by
the Employer pursuant to a salary reduction agreement
and which are not includible in the gross income of the
Participant under Code Sections 125, 402(a)(8), 402(h),
403(b) or 457, and Employee contributions described in
Code Section 414(h)(2) that are treated as Employer
contributions.
For a Participant's initial year of participation,
Compensation shall be recognized as of such Employee's effective
date of participation pursuant to Section 3.3.
Compensation in excess of $200,000 shall be
disregarded. Such amount shall be adjusted at the same time and
in such manner as permitted under Code Section 415(d), except
that the dollar increase in effect on January 1 of any calendar
year shall be effective for the Plan Year beginning with or
within such calendar year and the first adjustment to the
$200,000 limitation shall be effective on January 1, 1990. For
any short Plan Year the Compensation limit shall be an amount
equal to the Compensation limit for the calendar year in which
the Plan Year begins multiplied by the ratio obtained by dividing
the number of full months in the short Plan Year by twelve (12).
In applying this limitation, the family group of a highly
Compensated Participant who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such
Participant is either a "five percent owner" of the Employer or
one of the ten (10) Highly Compensated Employees paid the
greatest "415 Compensation" during the year, shall be treated as
a single Participant, except that for this purpose Family Members
shall include only the affected Participant's spouse and any
lineal descendants who have not attained age nineteen (19) before
the close of the year. If, as a result of the application of such
rules the adjusted $200,000 limitation is exceeded, then the
limitation shall be prorated among the affected Family Members in
proportion to each such Family Member's Compensation prior to the
application of this limitation, or the limitation shall be
adjusted in accordance with any other method permitted by
Regulation.
3
<PAGE> 10
If, as a result of such rules, the maximum "annual
addition" limit of Section 4.9(a) would be exceeded for one or
more of the affected Family Members, the prorated Compensation of
all affected Family Members shall be adjusted to avoid or reduce
any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted
downward to the level needed to provide an allocation equal to
such limit. The prorated Compensation of affected Family Members
not affected by such limit shall then be adjusted upward on a
pro rata basis not to exceed each such affected Family Member's
Compensation as determined prior to application of the Family
Member rule. The resulting allocation shall not exceed such
individual's maximum "annual addition" limit. If, after these
adjustments, an "excess amount" still results, such "excess
amount" shall be disposed of in the manner described in Section
4.10(a) pro rata among all affected Family Members.
For purposes of this Section, if the Plan is a plan
described in Code Section 413(c) or 414(f) (a plan maintained by
more than one Employer), the $200,000 limitation applies
separately with respect to the Compensation of any Participant
from each Employer maintaining the Plan.
If, in connection with the adoption of this amendment
and restatement, the definition of Compensation has been
modified, then, for Plan Years prior to the Plan Year which
includes the adoption date of this amendment and restatement,
Compensation means compensation determined pursuant to the Plan
then in effect.
For Plan Years beginning prior to January 1, 1989, the
$200,000 limit (without regard to Family Member aggregation)
shall apply only for Top Heavy Plan Years and shall not be
adjusted.
1.9 "Contract" or "Policy" means any life insurance policy,
retirement income or annuity policy, or annuity contract (group
or individual) issued pursuant to the terms of the Plan.
1.10 "Deferred Compensation" with respect to any Participant
means the amount of the Participant's total Compensation which
has been contributed to the Plan in accordance with the
Participant's deferral election pursuant to Section 4.2 excluding
any such amounts distributed as excess "annual additions"
pursuant to Section 4.10(a).
4
<PAGE> 11
1.11 "Early Retirement Date" means the first day of the
month (prior to the Normal Retirement Date) coinciding with or
following the date on which a Participant or Former Participant
attains age 55 and has completed at least 5 Years of Service with
the Employer (Early Retirement Age). A Participant shall become
fully Vested upon satisfying this requirement if still employed
at his Early Retirement Age.
A Former Participant who terminates employment after
satisfying the service requirement for Early Retirement and who
thereafter reaches the age requirement contained herein shall be
entitled to receive his benefits under this Plan.
1.12 "Elective Contribution" means the Employer's
contributions to the Plan of Deferred Compensation excluding any
such amounts distributed as excess "annual additions" pursuant to
Section 4.10(a). In addition, any Employer Qualified Non-Elective
Contribution made pursuant to Section 4.6 shall be considered an
Elective Contribution for purposes of the Plan. Any such
contributions deemed to be Elective Contributions shall be
subject to the requirements of Sections 4.2(b) and 4.2(c) and
shall further be required to satisfy the discrimination
requirements of Regulation 1.401(k)-1(b)(5), the provisions of
which are specifically incorporated herein by reference.
1.13 "Eligible Employee" means any Employee.
Employees whose employment is governed by the terms of
a collective bargaining agreement between Employee
representatives (within the meaning of Code Section 7701(a)(46))
and the Employer under which retirement benefits were the subject
of good faith bargaining between the parties will not be eligible
to participate in this Plan unless such agreement expressly
provides for coverage in this Plan or two percent or less of the
Employees of the Employer who are covered pursuant to that
agreement are professionals as defined in Regulation 1.410(b)-9.
Employees who are nonresident aliens (within the
meaning of Code Section 7701(b)(1)(B)) and who receive no earned
income (within the meaning of Code Section 911(d)(2)) from the
Employer which constitutes income from sources within the United
States (within the meaning of Code Section 861(a)(3)) shall not
be eligible to participate in this Plan.
Employees of Affiliated Employers shall not be eligible
to participate in this Plan unless such Affiliated Employers have
specifically adopted this Plan in writing.
5
<PAGE> 12
1.14 "Employee" means any person who is employed by the
Employer or Affiliated Employer, but excludes any person who is
an independent contractor. Employee shall include Leased
Employees within the meaning of Code Sections 414(n)(2) and
414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do
not constitute more than 20% of the recipient's non-highly
compensated work force.
1.15 "Employer" means Telxon Corp. and any Participating
Employer (as defined in Section 10.1) which shall adopt this
Plan; any successor which shall maintain this Plan; and any
predecessor which has maintained this Plan. The Employer is a
corporation, with principal offices in the State of Ohio.
1.16 "Excess Aggregate Contributions" means, with respect to
any Plan Year, the excess of the aggregate amount of the Employer
matching contributions made pursuant to Section 4.1(b), voluntary
Employee contributions made pursuant to Section 4.12, Excess
Contributions recharacterized as voluntary Employee contributions
pursuant to Section 4.6(a) and any qualified non-elective
contributions or elective deferrals taken into account pursuant
to Section 4.7(c) on behalf of Highly Compensated Participants
for such Plan Year, over the maximum amount of such contributions
permitted under the limitations of Section 4.7(a).
1.17 "Excess Contributions" means, with respect to a Plan
Year, the excess of Elective Contributions made on behalf of
Highly Compensated Participants for the Plan Year over the
maximum amount of such contributions permitted under Section
4.5(a). Excess Contributions, including amounts recharacterized
pursuant to Section 4.6(a)(2), shall be treated as an "annual
addition" pursuant to Section 4.9(b).
1.18 "Excess Deferred Compensation" means, with respect to
any taxable year of a Participant, the excess of the aggregate
amount of such Participant's Deferred Compensation and the
elective deferrals pursuant to Section 4.2(f) actually made on
behalf of such Participant for such taxable year, over the dollar
limitation provided for in Code Section 402(g), which is
incorporated herein by reference. Excess Deferred Compensation
shall be treated as an "annual addition" pursuant to Section
4.9(b) when contributed to the Plan unless distributed to the
affected Participant not later than the first April 15th
following the close of the Participant's taxable year.
Additionally, for purposes of Sections 2.2 and 4.4(g), Excess
Deferred Compensation shall continue to be treated as Employer
contributions even if distributed pursuant to Section 4.2(f).
However, Excess Deferred Compensation of Non-Highly Compensated
6
<PAGE> 13
Participants is not taken into account for purposes of Section
4.5(a) to the extent such Excess Deferred Compensation occurs
pursuant to Section 4.2(d).
1.19 "Family Member" means, with respect to an affected
Participant, such Participant's spouse, such Participant's lineal
descendants and ascendants and their spouses, all as described in
Code Section 414(q)(6)(B).
1.20 "Fiduciary" means any person who (a) exercises any
discretionary authority or discretionary control respecting
management of the Plan or exercises any authority or control
respecting management or disposition of its assets, (b) renders
investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the
Plan or has any authority or responsibility to do so, or (c) has
any discretionary authority or discretionary responsibility in
the administration of the Plan, including, but not limited to,
the Trustee, the Employer and its representative body, and the
Administrator.
1.21 "Fiscal Year" means the Employer's accounting year of
12 months commencing on April 1st of each year and ending the
following March 31st.
1.22 "Forfeiture" means that portion of a Participant's
Account that is not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested
portion of a Participant's Account, or
(b) the last day of the Plan Year in which the
Participant incurs five (5) consecutive 1-Year Breaks
in Service.
Furthermore, for purposes of paragraph (a) above, in
the case of a Terminated Participant whose Vested benefit is
zero, such Terminated Participant shall be deemed to have
received a distribution of his Vested benefit upon his
termination of employment. Restoration of such amounts shall
occur pursuant to Section 6.4(g)(2). In addition, the term
Forfeiture shall also include amounts deemed to be Forfeitures
pursuant to any other provision of this Plan.
7
<PAGE> 14
1.23 "Former Participant" means a person who has been a
Participant, but who has ceased to be a Participant for any
reason.
1.24 "415 Compensation" with respect to any Participant
means such Participant's wages, salaries, fees for professional
services and other amounts received (without regard to whether or
not an amount is paid in cash) for personal services actually
rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are
includible in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the basis
of a percentage of profits, commissions on insurance premiums,
tips, bonuses, fringe benefits, and reimbursements or other
expense allowances under a nonaccountable plan (as described in
Regulation 1.62-2(c)) for a Plan Year.
"415 Compensation" shall exclude (a)(1) contributions
made by the Employer to a plan of deferred compensation to the
extent that, the contributions are not includible in the gross
income of the Participant for the taxable year in which
contributed, (2) Employer contributions made on behalf of an
Employee to a simplified employee pension plan described in Code
Section 408(k) to the extent such contributions are excludable
from the Employee's gross income, (3) any distributions from a
plan of deferred compensation; (b) amounts realized from the
exercise of a non-qualified stock option, or when restricted
stock (or property) held by an Employee either becomes freely
transferable or is no longer subject to a substantial risk of
forfeiture; (c) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(d) other amounts which receive special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of any annuity contract
described in Code Section 403(b) (whether or not the
contributions are actually excludable from the gross income of
the Employee).
If, in connection with the adoption of this amendment
and restatement, the definition of "415 Compensation" has been
modified, then, for Plan Years prior to the Plan Year which
includes the adoption date of this amendment and restatement,
"415 Compensation" means compensation determined pursuant to the
Plan then in effect.
8
<PAGE> 15
1.25 "414(s) Compensation" with respect to any Participant
means such Participant's Elective Contributions attributable to
Deferred Compensation recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) plus "415 Compensation"
paid during a Plan Year. The amount of "414(s) Compensation" with
respect to any Participant shall include "414(s) Compensation"
for the entire twelve (12) month period ending on the last day of
such Plan Year, except that "414(s) Compensation" shall only be
recognized for that portion of the Plan Year during which an
Employee was a Participant in the Plan.
For purposes of this Section, the determination of
"414(s) Compensation" shall be made by including amounts which
are contributed by the Employer pursuant to a salary reduction
agreement and which are not includible in the gross income of the
Participant under Code Sections 125, 402(a)(8), 402(h), 403(b) or
457, and Employee contributions described in Code Section
414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $200,000 shall be
disregarded. Such amount shall be adjusted at the same time and
in such manner as permitted under Code Section 415(d), except
that the dollar increase in effect on January 1 of any calendar
year shall be effective for the Plan Year beginning with or
within such calendar year and the first adjustment to the
$200,000 limitation shall be effective on January 1, 1990. For
any short Plan Year the "414(s) Compensation" limit shall be an
amount equal to the "414(s) Compensation" limit for the calendar
year in which the Plan Year begins multiplied by the ratio
obtained by dividing the number of full months in the short Plan
Year by twelve (12). In applying this limitation, the family
group of a Highly Compensated Participant who is subject to the
Family Member aggregation rules of Code Section 414(q)(6) because
such Participant is either a "five percent owner" of the Employer
or one of the ten (10) Highly Compensated Employees paid the
greatest "415 Compensation" during the year, shall be treated as
a single Participant, except that for this purpose Family Members
shall include only the affected Participant's spouse and any
lineal descendants who have not attained age nineteen (19) before
the close of the year.
If, in connection with the adoption of this amendment
and restatement, the definition of "414(s) Compensation" has been
modified, then, for Plan Years prior to the Plan Year which
includes the adoption date of this amendment and restatement,
"414(s) Compensation" means compensation determined pursuant to
the Plan then in effect.
9
<PAGE> 16
1.26 "Highly Compensated Employee" means an Employee
described in Code Section 414(q) and the Regulations thereunder,
and generally means an Employee who performed services for the
Employer during the "determination year" and is in one or more of
the following groups:
(a) Employees who at any time during the
"determination year" or "look-back year" were "five
percent owners" as defined in Section 1.32(c).
(b) Employees who received "415 Compensation"
during the "look-back year" from the Employer in excess
of $75,000.
(c) Employees who received "415 Compensation"
during the "look-back year" from the Employer in excess
of $50,000 and were in the Top Paid Group of Employees
for the Plan Year.
(d) Employees who during the "look-back year"
were officers of the Employer (as that term is defined
within the meaning of the Regulations under Code
Section 416) and received "415 Compensation" during the
"look-back year" from the Employer greater than 50
percent of the limit in effect under Code Section
415(b)(1)(A) for any such Plan Year. The number of
officers shall be limited to the lesser of (i) 50
employees; or (ii) the greater of 3 employees or 10
percent of all employees. For the purpose of
determining the number of officers, Employees described
in Section 1.56(a), (b), (c) and (d) shall be excluded,
but such Employees shall still be considered for the
purpose of identifying the particular Employees who are
officers. If the Employer does not have at least one
officer whose annual "415 Compensation" is in excess of
50 percent of the Code Section 415(b)(1)(A) limit, then
the highest paid officer of the Employer will be
treated as a Highly Compensated Employee.
(e) Employees who are in the group consisting of
the 100 Employees paid the greatest "415 Compensation"
during the "determination year" and are also described
in (b), (c) or (d) above when these paragraphs are
modified to substitute "determination year" for
"look-back year".
The "look-back year" shall be the calendar year ending
with or within the Plan Year for which testing is being
performed, and the "determination year" (if applicable) shall be
10
<PAGE> 17
the period of time, if any, which extends beyond the "look-back
year" and ends on the last day of the Plan Year for which testing
is being performed (the "lag period"). If the "lag period" is
less than twelve months long, the dollar threshold amounts
specified in (b), (c) and (d) above shall be prorated based upon
the number of months in the "lag period".
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts that would
otherwise be excluded from a Participant's gross income by reason
of the application of Code Sections 125, 402(a)(8), 402(h)(1)(B)
and, in the case of Employer contributions made pursuant to a
salary reduction agreement, by including amounts that would
otherwise be excluded from a Participant's gross income by reason
of the application of Code Section 403(b). Additionally, the
dollar threshold amounts specified in (b) and (c) above shall be
adjusted at such time and in such manner as is provided in
Regulations. In the case of such an adjustment, the dollar limits
which shall be applied are those for the calendar year in which
the "determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee,
Employees who are non-resident aliens and who received no earned
income (within the meaning of Code Section 911(d)(2)) from the
Employer constituting United States source income within the
meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken
into account as a single employer and Leased Employees within the
meaning of Code Sections 414(n)(2) and 414(o)(2) shall be
considered Employees unless such Leased Employees are covered by
a plan described in Code Section 414(n)(5) and are not covered in
any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform
and consistent basis for all of the Employer's retirement plans.
Highly Compensated Former Employees shall be treated as Highly
Compensated Employees without regard to whether they performed
services during the "determination year".
1.27 "Highly Compensated Former Employee" means a former
Employee who had a separation year prior to the "determination
year" and was a Highly Compensated Employee in the year of
separation from service or in any "determination year" after
attaining age 55. Notwithstanding the foregoing, an Employee who
separated from service prior to 1987 will be treated as a Highly
Compensated Former Employee only if during the separation year
(or year preceding the separation year) or any year after the
Employee attains age 55 (or the last year ending before the
Employee's 55th birthday), the Employee either received "415
Compensation" in excess of $50,000 or was a "five percent owner".
11
<PAGE> 18
For purposes of this Section, "determination year", "415
Compensation" and "five percent owner" shall be determined in
accordance with Section 1.26. Highly Compensated Former Employees
shall be treated as Highly Compensated Employees. The method set
forth in this Section for determining who is a "Highly
Compensated Former Employee" shall be applied on a uniform and
consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
1.28 "Highly Compensated Participant" means any Highly
Compensated Employee who is eligible to participate in the Plan
pursuant to Section 3.1.
1.29 "Hour of Service" means (1) each hour for which an
Employee is directly or indirectly compensated or entitled to
compensation by the Employer for the performance of duties during
the applicable computation period; (2) each hour for which an
Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the
employment relationship has terminated) for reasons other than
performance of duties (such as vacation, holidays, sickness, jury
duty, disability, lay-off, military duty or leave of absence)
during the applicable computation period; (3) each hour for which
back pay is awarded or agreed to by the Employer without regard
to mitigation of damages. These hours will be credited to the
Employee for the computation period or periods to which the award
or agreement pertains rather than the computation period in which
the award, agreement or payment is made. The same Hours of
Service shall not be credited both under (1) or (2), as the case
may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours
of Service are required to be credited to an Employee on account
of any single continuous period during which the Employee
performs no duties (whether or not such period occurs in a single
computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account
of a period during which no duties are performed is not required
to be credited to the Employee if such payment is made or due
under a plan maintained solely for the purpose of complying with
applicable worker's compensation, or unemployment compensation or
disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an
Employee for medical or medically related expenses incurred by
the Employee.
For purposes of this Section, a payment shall be deemed
to be made by or due from the Employer regardless of whether such
payment is made by or due from the Employer directly, or
12
<PAGE> 19
indirectly through, among others, a trust fund, or insurer, to
which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or
other entity are for the benefit of particular Employees or are
on behalf of a group of Employees in the aggregate.
An Hour of Service must be counted for the purpose of
determining a Year of Service, a year of participation for
purposes of accrued benefits, a 1-Year Break in Service, and
employment commencement date (or reemployment commencement date).
In addition, Hours of Service will be credited for employment
with other Affiliated Employers. The provisions of Department of
Labor regulations 2530.200b-2(b) and (c) are incorporated herein
by reference.
1.30 "Income" means the income or losses allocable to
"excess amounts" which shall equal the allocable gain or loss for
the "applicable computation period". The income allocable to
"excess amounts" for the "applicable computation period" is
determined by multiplying the income for the "applicable
computation period" by a fraction. The numerator of the fraction
is the "excess amount" for the "applicable computation period".
The denominator of the fraction is the total "account balance"
attributable to "Employer contributions" as of the end of the
"applicable computation period", reduced by the gain allocable to
such total amount for the "applicable computation period" and
increased by the loss allocable to such total amount for the
"applicable computation period". The provisions of this Section
shall be applied:
(a) For purposes of Section 4.2(f), by
substituting:
(1) "Excess Deferred Compensation" for "excess
amounts";
(2) "taxable year of the Participant" for
"applicable computation period";
(3) "Deferred Compensation" for "Employer
contributions"; and
(4) "Participant's Elective Account" for
"account balance".
(b) For purposes of Section 4.6(a), by
substituting:
13
<PAGE> 20
(1) "Excess Contributions" for "excess amounts";
(2) "Plan Year" for "applicable computation
period";
(3) "Elective Contributions" for "Employer
contributions"; and
(4) "Participant's Elective Account" for
"account balance".
(c) For purposes of Section 4.8(a), by
substituting:
(1) "Excess Aggregate Contributions" for "excess
amounts";
(2) "Plan Year" for "applicable computation
period"
(3) "Employer matching contributions made
pursuant to Section 4.1(b), voluntary Employee
contributions made pursuant to Section 4.12 and
any qualified non-elective contributions or
elective deferrals taken into account pursuant to
Section 4.7(c)" for "Employer contributions"; and
(4) "Participant's Account and Voluntary
Contribution Account" for "account balance".
Income allocable to any distribution of Excess Deferred
Compensation on or before the last day of the taxable year of the
Participant shall be calculated from the first day of the taxable
year of the Participant to the date on which the distribution is
made pursuant to either the "fractional method" or the "safe
harbor method". Under such "safe harbor method", allocable Income
for such period shall be deemed to equal ten percent (10%) of the
Income allocable to such Excess Deferred Compensation multiplied
by the number of calendar months in such period. For purposes of
determining the number of calendar months in such period, a
distribution occurring on or before the fifteenth day of the
month shall be treated as having been made on the last day of the
preceding month and a distribution occurring after such fifteenth
day shall be treated as having been made on the first day of the
next subsequent month.
The Income allocable to Excess Aggregate Contributions
resulting from the recharacterization of Elective Contributions
shall be determined and distributed as if such recharacterized
Elective Contributions had been distributed as Excess
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<PAGE> 21
Contributions.
Notwithstanding the above, for "applicable computation
periods" which began in 1987, Income during the "gap period"
shall not be taken into account.
1.31 "Investment Manager" means an entity that (a) has the
power to manage, acquire, or dispose of Plan assets and
(b) acknowledges fiduciary responsibility to the Plan in writing.
Such entity must be a person, firm, or corporation registered as
an investment adviser under the Investment Advisers Act of 1940,
a bank, or an insurance company.
1.32 "Key Employee" means an Employee as defined in Code
Section 416(i) and the Regulations thereunder. Generally, any
Employee or former Employee (as well as each of his
Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or
any of the preceding four (4) Plan Years, has been included in
one of the following categories:
(a) an officer of the Employer (as that term is
defined within the meaning of the Regulations under
Code Section 416) having annual "415 Compensation"
greater than 50 percent of the amount in effect under
Code Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415
Compensation" from the Employer for a Plan Year greater
than the dollar limitation in effect under Code Section
415(c)(1)(A) for the calendar year in which such Plan
Year ends and owning (or considered as owning within
the meaning of Code Section 318) both more than
one-half percent interest and the largest interests in
the Employer.
(c) a "five percent owner" of the Employer.
"Five percent owner" means any person who owns (or is
considered as owning within the meaning of Code Section
318) more than five percent (5%) of the outstanding
stock of the Employer or stock possessing more than
five percent (5%) of the total combined voting power of
all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than
five percent (5%) of the capital or profits interest in
the Employer. In determining percentage ownership
hereunder, employers that would otherwise be aggregated
under Code Sections 414(b), (c), (m) and (o) shall be
treated as separate employers.
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<PAGE> 22
(d) a "one percent owner" of the Employer having
an annual "415 Compensation" from the Employer of more
than $150,000. "One percent owner" means any person who
owns (or is considered as owning within the meaning of
Code Section 318) more than one percent (1%) of the
outstanding stock of the Employer or stock possessing
more than one percent (1%) of the total combined voting
power of all stock of the Employer or, in the case of
an unincorporated business, any person who owns more
than one percent (1%) of the capital or profits
interest in the Employer. In determining percentage
ownership hereunder, employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o)
shall be treated as separate employers. However, in
determining whether an individual has "415
Compensation" of more than $150,000, "415 Compensation"
from each employer required to be aggregated under Code
Sections 414(b), (c), (m) and (o) shall be taken into
account.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts that would
otherwise be excluded from a Participant's gross income by reason
of the application of Code Sections 125, 402(a)(8), 402(h)(1)(B)
and, in the case of Employer contributions made pursuant to a
salary reduction agreement, by including amounts that would
otherwise be excluded from a Participant's gross income by reason
of the application of Code Section 403(b).
1.33 "Late Retirement Date" means the first day of the month
coinciding with or next following a Participant's actual
Retirement Date after having reached his Normal Retirement Date.
1.34 "Leased Employee" means any person (other than an
Employee of the recipient) who pursuant to an agreement between
the recipient and any other person ("leasing organization") has
performed services for the recipient (or for the recipient and
related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at
least one year, and such services are of a type historically
performed by employees in the business field of the recipient
employer. Contributions or benefits provided a Leased Employee by
the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided
by the recipient employer. A Leased Employee shall not be
considered an Employee of the recipient:
(a) if such employee is covered by a money
purchase pension plan providing:
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<PAGE> 23
(1) a non-integrated employer contribution rate
of at least 10% of compensation, as defined in
Code Section 415(c)(3), but including amounts
contributed pursuant to a salary reduction
agreement which are excludable from the
employee's gross income under Code Sections 125,
402(a)(8), 402(h) or 403(b);
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more
than 20% of the recipient's non-highly compensated work
force.
1.35 "Non-Elective Contribution" means the Employer's
contributions to the Plan excluding, however, contributions made
pursuant to the Participant's deferral election provided for in
Section 4.2 and any Qualified Non-Elective Contribution.
1.36 "Non-Highly Compensated Participant" means any
Participant who is neither a Highly Compensated Employee nor a
Family Member.
1.37 "Non-Key Employee" means any Employee or former
Employee (and his Beneficiaries) who is not a Key Employee.
1.38 "Normal Retirement Age" means the Participant's 65th
birthday. A Participant shall become fully Vested in his
Participant's Account upon attaining his Normal Retirement Age.
1.39 "Normal Retirement Date" means the first bay of the
month coinciding with or next following the Participant's Normal
Retirement Age.
1.40 "1-Year Break in Service" means the applicable
computation period during which an Employee has not completed
more than 500 Hours of Service with the Employer. Further, solely
for the purpose of determining whether a Participant has incurred
a 1-Year Break in Service, Hours of Service shall be recognized
for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and 1-Year Breaks in Service
shall be measured on the same computation period.
"Authorized leave of absence" means an unpaid,
temporary cessation from active employment with the Employer
pursuant to an established nondiscriminatory policy, whether
occasioned by illness, military service, or any other reason.
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<PAGE> 24
A "maternity or paternity leave of absence" means, for
Plan Years beginning after December 31, 1984, an absence from
work for any period by reason of the Employee's pregnancy, birth
of the Employee's child, placement of a child with the Employee
in connection with the adoption of such child, or any absence for
the purpose of caring for such child for a period immediately
following such birth or placement. For this purpose, Hours of
Service shall be credited for the computation period in which the
absence from work begins, only if credit therefore is necessary
to prevent the Employee from incurring a 1-Year Break in Service,
or, in any other case, in the immediately following computation
period. The Hours of Service credited for a "maternity or
paternity leave of absence" shall be those which would normally
have been credited but for such absence, or, in any case in which
the Administrator is unable to determine such hours normally
credited, eight (8) Hours of Service per day. The total Hours of
Service required to be credited for a "maternity or paternity
leave of absence" shall not exceed 501.
1.41 "Participant" means any Eligible Employee who
participates in the Plan as provided in Sections 3.2 and 3.3, and
has not for any reason become ineligible to participate further
in the Plan.
1.42 "Participant's Account" means the account established
and maintained by the Administrator for each Participant with
respect to his total interest in the Plan and Trust resulting
from the Employer's Non-Elective Contributions.
A separate accounting shall be maintained with respect
to that portion of the Participant's Account attributable to
Employer matching contributions made pursuant to Section 4.1(b)
and Employer discretionary contributions made pursuant to Section
4.1(c).
1.43 "Participant's Combined Account" means the total
aggregate amount of each Participant's Elective Account and
Participant's Account.
1.44 "Participant's Elective Account" means the account
established and maintained by the Administrator for each
Participant with respect to his total interest in the Plan and
Trust resulting from the Employer's Elective Contributions. A
separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to
Elective Contributions pursuant to Section 4.2 and any Employer
Qualified Non-Elective Contributions.
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<PAGE> 25
1.45 "Plan" means this instrument, including all amendments
thereto.
1.46 "Plan Year" means the Plan's accounting year of twelve
(12) months commencing on January 1st of each year and ending the
following December 31st.
1.47 "Pre-Retirement Survivor Annuity" is an immediate
annuity for the life of the Participant's spouse the payments
under which must be equal to the amount of benefit which can be
purchased with the accounts of a Participant used to provide the
death benefit under the Plan.
1.48 "Qualified Non-Elective Contribution" means the
Employer's contributions to the Plan that are made pursuant to
Section 4.6. Such contributions shall be considered an Elective
Contribution for the purposes of the Plan and used to satisfy the
"Actual Deferral Percentage" tests.
In addition, the Employer's contributions to the Plan
that are made pursuant to Section 4.8(h) which are used to
satisfy the "Actual Contribution Percentage" tests shall be
considered Qualified Non-Elective Contributions and be subject to
the provisions of Sections 4.2(b) and 4.2(c).
1.49 "Regulation" means the Income Tax Regulations as
promulgated by the Secretary of the Treasury or his delegate, and
as amended from time to time.
1.50 "Retired Participant" means a person who has been a
Participant, but who has become entitled to retirement benefits
under the Plan.
1.51 "Retirement Date" means the date as of which a
Participant retires for reasons other than Total and Permanent
Disability, whether such retirement occurs on a Participant's
Normal Retirement Date, Early or Late Retirement Date (see
Section 6.1).
1.52 "Super Top Heavy Plan" means a plan described in
Section 2.2(b).
1.53 "Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other than
by death, Total and Permanent Disability or retirement.
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<PAGE> 26
1.54 "Top Heavy Plan" means a plan described in Section
2.2(a).
1.55 "Top Heavy Plan Year" means a Plan Year during which
the Plan is a Top Heavy Plan.
1.56 "Top Paid Group" means the top 20 percent of Employees
who performed services for the Employer during the applicable
year, ranked according to the amount of "415 Compensation"
(determined for this purpose in accordance with Section 1.26)
received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and
Leased Employees within the meaning of Code Sections 414(n)(2)
and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section
414(n)(5) and are not covered in any qualified plan maintained by
the Employer. Employees who are non-resident aliens and who
received no earned income (within the meaning of Code Section
911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a)(3) shall not be
treated as Employees. Additionally, for the purpose of
determining the number of active Employees in any year, the
following additional Employees shall also be excluded; however,
such Employees shall still be considered for the purpose of
identifying the particular Employees in the Top Paid Group:
(a) Employees with less than six (6) months of
service;
(b) Employees who normally work less than 17 1/2
hours per week;
(c) Employees who normally work less than six
(6) months during a year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of
the Employer are covered under agreements the Secretary of Labor
finds to be collective bargaining agreements between Employee
representatives and the Employer, and the Plan covers only
Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both
the total number of active Employees as well as from the
identification of particular Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section
shall be applied on a uniform and consistent basis for all
purposes for which the Code Section 414(q) definition is
applicable.
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<PAGE> 27
1.57 "Total and Permanent Disability" means a physical or
mental condition of a Participant resulting from bodily injury,
disease, or mental disorder which renders him incapable of
continuing his usual and customary employment with the Employer.
The disability of a Participant shall be determined by a licensed
physician chosen by the Administrator. The determination shall be
applied uniformly to all Participants.
1.58 "Trustee" means the person or entity named as trustee
herein or in any separate trust forming a part of this Plan, and
any successors.
1.59 "Trust Fund" means the assets of the Plan and Trust as
the same shall exist from time to time.
1.60 "Vested" means the nonforfeitable portion of any
account maintained on behalf of a Participant.
1.61 "Voluntary Contribution Account" means the account
established and maintained by the Administrator for each
Participant with respect to his total interest in the Plan
resulting from the Participant's nondeductible voluntary
contributions made pursuant to Section 4.12.
Amounts recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) shall remain subject to
the limitations of Sections 4.2(b) and 4.2(c). Therefore, a
separate accounting shall be maintained with respect to that
portion of the Voluntary Contribution Account attributable to
voluntary Employee contributions made pursuant to Section 4.12.
1.62 "Year of Service" means the computation period of
twelve (12) consecutive months, herein set forth, during which an
Employee has at least 1000 Hours of Service.
For purposes of eligibility for participation, the
initial computation period shall begin with the date on which the
Employee first performs an Hour of Service. The participation
computation period beginning after a 1-Year Break in Service
shall be measured from the date on which an Employee again
performs an Hour of Service. The participation computation period
shall shift to the Plan Year which includes the anniversary of
the date on which the Employee first performed an Hour of
Service. An Employee who is credited with the required Hours of
Service in both the initial computation period (or the
computation period beginning after a 1-Year Break in Service) and
the Plan Year which includes the anniversary of the date on which
the Employee first performed an Hour of Service, shall be
credited with two (2) Years of Service for purposes of
eligibility to participate.
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<PAGE> 28
For vesting purposes, the computation period shall be
the twelve month period from the Participant's date of hire to
the Anniversary of his or her date of hire.
For all other purposes, the computation period shall be
the Plan Year.
Notwithstanding the foregoing, for any short Plan Year,
the determination of whether an Employee has completed a Year of
Service shall be made in accordance with Department of Labor
regulation 2530.203-2(c). However, in determining whether an
Employee has completed a Year of Service for benefit accrual
purposes in the short Plan Year, the number of the Hours of
Service required-shall be proportionately reduced based on the
number of full months in the short Plan Year.
Years of Service with any Affiliated Employer shall be
recognized.
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the
special vesting requirements of Code Section 416(b) pursuant to
Section 6.4 of the Plan and the special minimum allocation
requirements of Code Section 416(c) pursuant to Section 4.4 of
the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any
Plan Year in which, as of the Determination Date,
(1) the Present Value of Accrued Benefits of Key
Employees and (2) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an
Aggregation Group, exceeds sixty percent (60%) of the
Present Value of Accrued Benefits and the Aggregate
Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for
any Plan Year, but such Participant was a Key Employee
for any prior Plan Year, such Participant's Present
Value of Accrued Benefit and/or Aggregate Account
balance shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy or Super
Top Heavy Plan (or whether any Aggregation Group which
22
<PAGE> 29
includes this Plan is a Top Heavy Group). In addition,
if a Participant or Former Participant has not
performed any services for any Employer maintaining the
Plan at any time during the five year period ending on
the Determination Date, any accrued benefit for such
Participant or Former Participant shall not be taken
into account for the purposes of determining whether
this Plan is a Top Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan
for any Plan Year in which, as of the Determination
Date, (1) the Present Value of Accrued Benefits of Key
Employees and (2) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an
Aggregation Group, exceeds ninety percent (90%) of the
Present Value of Accrued Benefits and the Aggregate
Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate
Account as of the Determination Date is the sum of:
(1) his Participant's Combined Account balance
as of the most recent valuation occurring within
a twelve (12) month period ending on the
Determination Date;
(2) an adjustment for any contributions due as
of the Determination Date. Such adjustment shall
be the amount of any contributions actually made
after the valuation date but due on or before the
Determination Date, except for the first Plan
Year when such adjustment shall also reflect the
amount of any contributions made after the
Determination Date that are allocated as of a
date in that first Plan Year.
(3) any Plan distributions made within the Plan
Year that includes the Determination Date or
within the four (4) preceding Plan Years.
However, in the case of distributions made after
the valuation date and prior to the Determination
Date, such distributions are not included as
distributions for top heavy purposes to the
extent that such distributions are already
included in the Participant's Aggregate Account
balance as of the valuation date. Notwithstanding
anything herein to the contrary, all
distributions, including distributions made prior
23
<PAGE> 30
to January 1, 1984, and distributions under a
terminated plan which if it had not been
terminated would have been required to be
included in an Aggregation Group, will be
counted. Further, distributions from the Plan
(including the cash value of life insurance
policies) of a Participant's account balance
because of death shall be treated as a
distribution for the purposes of this paragraph.
(4) any Employee contributions, whether
voluntary or mandatory. However, amounts
attributable to tax deductible qualified
voluntary employee contributions shall not be
considered to be a part of the Participant's
Aggregate Account balance.
(5) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are both
initiated by the Employee and made from a plan
maintained .by one employer to a plan maintained
by another employer), if this Plan provides the
rollovers or plan-to-plan transfers, it shall
always consider such rollovers or plan-to-plan
transfers as a distribution for the purposes of
this Section. If this Plan is the plan accepting
such rollovers or plan-to-plan transfers, it
shall not consider such rollovers or plan-to-plan
transfers as part of the Participant's Aggregate
Account balance.
(6) with respect to related rollovers and
plan-to-plan transfers (ones either not initiated
by the Employee or made to a plan maintained by
the same employer), if this Plan provides the
rollover or plan-to-plan transfer, it shall not
be counted as a distribution for purposes of this
Section. If this Plan is the plan accepting such
rollover or plan-to-plan transfer, it shall
consider such rollover or plan-to-plan transfer
as part of the Participant's Aggregate Account
balance, irrespective of the date on which such
rollover or plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two
employers are to be treated as the same employer
in (5) and (6) above, all employers aggregated
under Code Section 414(b), (c), (m) and (o) are
treated as the same employer.
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<PAGE> 31
(d) "Aggregation Group" means either a Required
Aggregation Group or a Permissive Aggregation Group as
hereinafter determined.
(1) Required Aggregation Group: In determining a
Required Aggregation Group hereunder, each plan
of the Employer in which a Key Employee is a
participant in the Plan Year containing the
Determination Date or any of the four preceding
Plan Years, and each other plan of the Employer
which enables any plan in which a Key Employee
participates to meet the requirements of Code
Sections 401(a)(4) or 410, will be required to be
aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation Group, each
plan in the group will be considered a Top Heavy
Plan if the Required Aggregation Group is a Top
Heavy Group. No plan in the Required Aggregation
Group will be considered a Top Heavy Plan if the
Required Aggregation Group is not a Top Heavy
Group.
(2) Permissive Aggregation Group: The Employer
may also include any other plan not required to
be included in the Required Aggregation Group,
provided the resulting group, taken as a whole,
would continue to satisfy the provisions of Code
Sections 401(a)(4) and 410. Such group shall be
known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group,
only a plan that is part of the Required
Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is a Top
Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is not a
Top Heavy Group.
(3) Only those plans of the Employer in which
the Determination Dates fall within the same
calendar year shall be aggregated in order to
determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any
terminated plan of the Employer if it was
maintained within the last five (5) years ending
on the Determination Date.
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<PAGE> 32
(e) "Determination Date" means (a) the last day
of the preceding Plan Year, or (b) in the case of the
first Plan Year, the last day of such Plan Year.
(f) Present Value of Accrued Benefit: In the
case of a defined benefit plan, the Present Value of
Accrued Benefit for a Participant other than a Key
Employee, shall be as determined using the single
accrual method used for all plans of the Employer and
Affiliated Employers, or if no such single method
exists, using a method which results in benefits
accruing not more rapidly than the slowest accrual rate
permitted under Code Section 411(b)(1)(C). The
determination of the Present Value of Accrued Benefit
shall be determined as of the most recent valuation
date that falls within or ends with the 12-month period
ending on the Determination Date except as provided in
Code Section 416 and the Regulations thereunder for the
first and second plan years of a defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group
in which, as of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key
Employees under all defined benefit plans
included in the group, and
(2) the Aggregate Accounts of Key Employees
under all defined contribution plans included in
the group,
exceeds sixty percent (60%) of a similar sum
determined for all Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint
and remove the Trustee and the Administrator from time
to time as it deems necessary for the proper
administration of the Plan to assure that the Plan is
being operated for the exclusive benefit of the
Participants and their Beneficiaries in accordance with
the terms of the Plan, the Code, and the Act.
(b) The Employer shall establish a "funding
policy and method", i.e., it shall determine whether
the Plan has a short run need for liquidity (e.g., to
pay benefits) or whether liquidity is a long run goal
and investment growth (and stability of same) is a more
26
<PAGE> 33
current need, or shall appoint a qualified person to do
so. The Employer or its delegate shall communicate such
needs and goals to the Trustee, who shall coordinate
such Plan needs with its investment policy. The
communication of such a "funding policy and method"
shall not, however, constitute a directive to the
Trustee as to investment of the Trust Funds. Such
"funding policy and method" shall be consistent with
the objectives of this Plan and with the requirements
of Title I of the Act.
(c) The Employer shall periodically review the
performance of any Fiduciary or other person to whom
duties have been delegated or allocated by it under the
provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be
satisfied by formal periodic review by the Employer or
by a qualified person specifically designated by the
Employer, through day-to-day conduct and evaluation, or
through other appropriate ways.
(d) The Employer, may, in its discretion,
appoint an Investment Manager to manage all or a
designated portion of the assets of the Plan. In such
event, the Trustee shall follow the directive of the
Investment Manager in investing the assets of the Plan
managed by the Investment Manager.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators.
Any person, including, but not limited to, the Employees of the
Employer, shall be eligible to serve as an Administrator. Any
person so appointed shall signify his acceptance by filing
written acceptance with the Employer. An Administrator may resign
by delivering his written resignation to the Employer or be
removed by the Employer by delivery of written notice of removal,
to take effect at a date specified therein, or upon delivery to
the Administrator if no date is specified.
The Employer, upon the resignation or removal of an
Administrator, shall promptly designate in writing a successor to
this position. If the Employer does not appoint an Administrator,
the Employer will function as the Administrator.
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<PAGE> 34
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator,
the responsibilities of each Administrator may be specified by
the Employer and accepted in writing by each Administrator. In
the event that no such delegation is made by the Employer, the
Administrators may allocate the responsibilities among
themselves, in which event the Administrators shall notify the
Employer and the Trustee in writing of such action and specify
the responsibilities of each Administrator. The Trustee
thereafter shall accept and rely upon any documents executed by
the appropriate Administrator until such time as the Employer or
the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the Participants
and their Beneficiaries, subject to the specific terms of the
Plan. The Administrator shall administer the Plan in accordance
with its terms and shall have the power and discretion to
construe the terms of the Plan and to determine all questions
arising in connection with the administration, interpretation,
and application of the Plan. Any such determination by the
Administrator shall be conclusive and binding upon all persons.
The Administrator may establish procedures, correct any defect,
supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or
advisable to carry out the purpose of the Plan; provided,
however, that any procedure, discretionary act, interpretation or
construction shall be done in a nondiscriminatory manner based
upon uniform principles consistently applied and shall be
consistent with the intent that the Plan shall continue to be
deemed a qualified plan under the terms of Code Section 401(a),
and shall comply with the terms of the Act and all regulations
issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of
the general administration of the Plan, including, but not
limited to, the following:
(a) the discretion to determine all questions
relating to the eligibility of Employees to participate
or remain a Participant hereunder and to receive
benefits under the Plan;
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<PAGE> 35
(b) to compute, certify, and direct the Trustee
with respect to the amount and the kind of benefits to
which any Participant shall be entitled hereunder;
(c) to authorize and direct the Trustee with
respect to all nondiscretionary or otherwise directed
disbursements from the Trust;
(d) to maintain all necessary records for the
administration of the Plan;
(e) to interpret the provisions of the Plan and
to make and publish such rules for regulation of the
Plan as are consistent with the terms hereof;
(f) to determine the size and type of any
Contract to be purchased from any insurer, and to
designate the insurer from which such Contract shall be
purchased;
(g) to compute and certify to the Employer and
to the Trustee from time to time the sums of money
necessary or desirable to be contributed to the Plan;
(h) to consult with the Employer and the Trustee
regarding the short and long-term liquidity needs of
the Plan in order that the Trustee can exercise any
investment discretion in a manner designed to
accomplish specific objectives;
(i) to prepare and distribute to Employees a
procedure for notifying Participants and beneficiaries
of their rights to elect joint and survivor annuities
and Pre-Retirement Survivor Annuities as required by
the Act and Regulations thereunder;
(j) to prepare and implement a procedure to
notify Eligible Employees that they may elect to have a
portion of their Compensation deferred or paid to them
in cash;
(k) to assist any Participant regarding his
rights, benefits, or elections available under the Plan.
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2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions
taken and shall keep all other books of account, records, and
other data that may be necessary for proper administration of the
Plan and shall be responsible for supplying all information and
reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of
the Administrator, may appoint counsel, specialists, advisers,
and other persons as the Administrator or the Trustee deems
necessary or desirable in connection with the administration of
this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions,
the Employer shall supply full and timely information to the
Administrator on all matters relating to the Compensation of all
Participants, their Hours of Service, their Years of Service,
their retirement, death, disability, or termination of
employment, and such other pertinent facts as the Administrator
may require; and the Administrator shall advise the Trustee of
such of the foregoing facts as may be pertinent to the Trustee's
duties under the Plan. The Administrator may rely upon such
information as is supplied by the Employer and shall have no duty
or responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the
Trust Fund unless paid by the Employer. Such expenses shall
include any expenses incident to the functioning of the
Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and
other costs of administering the Plan. Until paid, the expenses
shall constitute a liability of the Trust Fund. However, the
Employer may reimburse the Trust Fund for any administration
expense incurred.
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<PAGE> 37
2.11 MAJORITY ACTIONS
Except where there has been an allocation and
delegation of administrative authority pursuant to Section 2.5,
if there shall be more than one Administrator, they shall act by
a majority of their number, but may authorize one or more of them
to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed with
the Administrator on forms supplied by the Employer. Written
notice of the disposition of a claim shall be furnished to the
claimant within 90 days after the application is filed. In the
event the claim is denied, the reasons for the denial shall be
specifically set forth in the notice in language calculated to be
understood by the claimant, pertinent provisions of the Plan
shall be cited, and, where appropriate, an explanation as to how
the claimant can perfect the claim will be provided. In addition,
the claimant shall be furnished with an explanation of the Plan's
claims review procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of
either, who has been denied a benefit by a decision of the
Administrator pursuant to Section 2.12 shall be entitled to
request the Administrator to give further consideration to his
claim by filing with the Administrator (on a form which may be
obtained from the Administrator) a request for a hearing. Such
request, together with a written statement of the reasons why the
claimant believes his claim should be allowed, shale be filed
with the Administrator no later than 60 days after receipt of the
written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60
days, at which the claimant may be represented by an attorney or
any other representative of his choosing and at which the
claimant shall have an opportunity to submit written and oral
evidence and arguments in support of his claim. At the hearing
(or prior thereto upon 5 business days written notice to the
Administrator) the claimant or his representative shall have an
opportunity to review all documents in the possession of the
Administrator which are pertinent to the claim at issue and its
disallowance. Either the claimant or the Administrator may cause
a court reporter to attend the hearing and record the
proceedings. In such event, a complete written transcript of the
proceedings shall be furnished to both parties by the court
reporter. The full expense of any such court reporter and such
transcripts shall be borne by the party causing the court
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<PAGE> 38
reporter to attend the hearing. A final decision as to the
allowance of the claim shall be made by the Administrator within
60 days of receipt of the appeal (unless there has been an
extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are
communicated to the claimant within the 60 day period). Such
communication shall be written in a manner calculated to be
understood by the claimant and shall include specific reasons for
the decision and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
For purposes of Section 4.3 of this Plan, any Eligible
Employee shall be eligible to participate hereunder as of his or
her date of hire. For all other purposes, any Eligible Employee
who has completed one (1) Year of Service shall be eligible to
participate hereunder as of the date he has satisfied such
requirements. However, any Employee who was a Participant in the
Plan prior to the effective date of this amendment and
restatement shall continue to participate in the Plan. The
Employer shall give each prospective Eligible Employee written
notice of his eligibility to participate in the Plan prior to the
close of the Plan Year in which he first becomes an Eligible
Employee.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each
Eligible Employee shall make application to the Employer for
participation in the Plan and agree to the terms hereof. Upon the
acceptance of any benefits under this Plan, such Employee shall
automatically be deemed to have made application and shall be
bound by the terms and conditions of the Plan and all amendments
hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant
effective as of the earlier of the April 1 or October 1
coinciding with or next following the date such Employee met the
eligibility requirements of Section 3.1, provided said Employee
was still employed as of such date (or if not employed on such
date, as of the date of rehire if a 1-Year Break in Service has
not occurred).
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<PAGE> 39
In the event an Employee who is not a member of an
eligible class of Employees becomes a member of an eligible
class, such Employee will participate immediately if such
Employee has satisfied the minimum age and service requirements
and would have otherwise previously become a Participant.
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of
each Employee for participation in the Plan based upon
information furnished by the Employer. Such determination shall
be conclusive and binding upon all persons, as long as the same
is made pursuant to the Plan and the Act. Such determination
shall be subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a
classification of an Eligible Employee to an ineligible
Employee, such Former Participant shall continue to
vest in his interest in the Plan for each Year of
Service completed while a noneligible Employee, until
such time as his Participant's Account shall be
forfeited or distributed pursuant to the terms of the
Plan. Additionally, his interest in the Plan shall
continue to share in the earnings of the Trust Fund.
(b) In the event a Participant is no longer a
member of an eligible class of Employees and becomes
ineligible to participate but has not incurred a 1-Year
Break in Service, such Employee will participate
immediately upon returning to an eligible class of
Employees. If such Participant incurs a 1-Year Break in
Service, eligibility will be determined under the break
in service rules of the Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be
included as a Participant in the Plan is erroneously omitted and
discovery of such omission is not made until after a contribution
by his Employer for the year has been made, the Employer shall
make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have
contributed with respect to him had he not been omitted. Such
contribution shall be made regardless of whether or not it is
deductible in whole or in part in any taxable year under
applicable provisions of the Code.
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<PAGE> 40
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have
been included as a Participant in the Plan is erroneously
included and discovery of such incorrect inclusion is not made
until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made
with respect to the ineligible person regardless of whether or
not a deduction is allowable with respect to such contribution.
In such event, the amount contributed with respect to the
ineligible person shall constitute a Forfeiture (except for
Deferred Compensation which shall be distributed to the
ineligible person) for the Plan Year in which the discovery is
made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the
Employer, elect voluntarily not to participate in the Plan. The
election not to participate must be communicated to the Employer,
in writing, at least thirty (30) days before the beginning of a
Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to
the Plan:
(a) The amount of the total salary reduction
elections of all Participants made pursuant to Section
4.2(a), which amount shall be deemed an Employer's
Elective Contribution.
(b) On behalf of each Participant who is
eligible to share in matching contributions for the
Plan Year, a discretionary matching contribution equal
to a percentage of each such Participant's Deferred
Compensation, the exact percentage to be determined
each year by the Employer, which amount shall be deemed
an Employer's Non-Elective Contribution. If a
Participant's rate of contribution changes during a
Plan Year, the Employer Matching Contribution
percentage shall be applied to the percentage as in
effect from time to time rather than to the cumulative
net contribution of such Participant for the Plan Year.
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<PAGE> 41
(c) A discretionary amount, which amount shall
be deemed an Employer's Non-Elective Contribution.
(d) Notwithstanding the foregoing, however, the
Employer's contributions for any Plan Year shall not
exceed the maximum amount allowable as a deduction to
the Employer under the provisions of Code Section 404.
All contributions by the Employer shall be made in cash
or in such property as is acceptable to the Trustee.
(e) Except, however, to the extent necessary to
provide the top heavy minimum allocations, the Employer
shall make a contribution even if it exceeds the amount
which is deductible under Code Section 404.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer from 1%
to 15% of his Compensation which would have been
received in the Plan Year, but for the deferral
election. A deferral election (or modification of an
earlier election) may not be made with respect to
Compensation which is currently available on or before
the date the Participant executed such election.
The amount by which Compensation is reduced
shall be that Participant's Deferred Compensation and
be treated as an Employer Elective Contribution and
allocated to that Participant's Elective Account.
(b) The balance in each Participant's Elective
Account shall be fully Vested at all times and shall
not be subject to Forfeiture for any reason.
(c) Amounts held in the Participant's Elective
Account may not be distributable earlier than:
(1) a Participant's termination of employment,
Total and Permanent Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the
establishment or existence of a "successor plan",
as that term is described in Regulation
1.401(k)-1(d)(3);
(4) the date of disposition by the Employer to
an entity that is not an Affiliated Employer of
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<PAGE> 42
substantially all of the assets (within the
meaning of Code Section 409(d)(2)) used in a
trade or business of such corporation if such
corporation continues to maintain this Plan after
the disposition with respect to a Participant who
continues employment with the corporation
acquiring such assets;
(5) the date of disposition by the Employer or
an Affiliated Employer who maintains the Plan of
its interest in a subsidiary (within the meaning
of Code Section 409(d)(3)) to an entity which is
not an Affiliated Employer but only with respect
to a Participant who continues employment with
such subsidiary; or
(6) the proven financial hardship of a
Participant, subject to the limitations of
Section 6.11.
(d) For each Plan Year beginning after
December 31, 1987, a Participant's Deferred
Compensation made under this Plan and all other plans,
contracts or arrangements of the Employer maintaining
this Plan shall not exceed, during any taxable year of
the Participant, the limitation imposed by Code Section
402(g), as in effect at the beginning of such taxable
year. If such dollar limitation is exceeded, a
Participant will be deemed to have notified the
Administrator of such excess amount which shall be
distributed in a manner consistent with 4.2(f). The
dollar limitation shall be adjusted annually pursuant
to the method provided in Code Section 415(d) in
accordance with Regulations.
(e) In the event a Participant has received a
hardship distribution from his Participant's Elective
Account pursuant to Section 6.11 or pursuant to
Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan
maintained by the Employer, then such Participant shall
not be permitted to elect-to have Deferred Compensation
contributed to the Plan on his behalf for a period of
twelve (12) months following the receipt of the
distribution. Furthermore, the dollar limitation under
Code Section 402(g) shall be reduced, with respect to
the Participant's taxable year following the taxable
year in which the hardship distribution was made, by
the amount of such Participant's Deferred Compensation,
if any, pursuant to this Plan (and any other plan
36
<PAGE> 43
maintained by the Employer) for the taxable year of the
hardship distribution.
(f) If a Participant's Deferred Compensation
under this Plan together with any elective deferrals
(as defined in Regulation 1.402(g)-1(b)) under another
qualified cash or deferred arrangement (as defined in
Code Section 401(k)), a simplified employee pension (as
defined in Code Section 408(k)), a salary reduction
arrangement (within the meaning of Code Section
3121(a)(5)(D)), a deferred compensation plan under Code
Section 457, or a trust described in Code Section
501(c)(18) cumulatively exceed the limitation imposed
by Code Section 402(g) (as adjusted annually in
accordance with the method provided in Code Section
415(d) pursuant to Regulations) for such Participant's
taxable year, the Participant may, not later than
March 1 following the close of the Participant's
taxable year, notify the Administrator in writing of
such excess and request that his Deferred Compensation
under this Plan be reduced by an amount specified by
the Participant. In such event, the Administrator may
direct the Trustee to distribute such excess amount
(and any Income allocable to such excess amount) to the
Participant not later than the first April 15th
following the close of the Participant's taxable year.
Distributions in accordance with this paragraph may be
made for any taxable year of the Participant which
begins after December 31, 1986. Any distribution of
less than the entire amount of Excess Deferred
Compensation and Income shall be treated as a pro rata
distribution of Excess Deferred Compensation and
Income. The amount distributed shall not exceed the
Participant's Deferred Compensation under the Plan for
the taxable year. Any distribution on or before the
last day of the Participant's taxable year must satisfy
each of the following conditions:
(1) the distribution must be made after the date
on which the Plan received the Excess Deferred
Compensation;
(2) the Participant shall designate the
distribution as Excess Deferred Compensation; and
(3) the Plan must designate the distribution as
a distribution of Excess Deferred Compensation.
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<PAGE> 44
Any distribution made pursuant to this
Section 4.2(f) shall be made simultaneously from
Deferred Compensation and matching contributions which
relate to such Deferred Compensation provided, however,
that any such matching contributions which are not
Vested shall be forfeited in lieu of distribution.
(g) Notwithstanding Section 4.2(f) above, a
Participant's Excess Deferred Compensation shall be
reduced, but not below zero, by any distribution and/or
recharacterization of Excess Contributions pursuant to
Section 4.6(a) for the Plan Year beginning with or
within the taxable year of the Participant.
(h) At Normal Retirement Date, or such other
date when the Participant shall be entitled to receive
benefits, the fair market value of the Participant's
Elective Account shall be used to provide additional
benefits to the Participant or his Beneficiary.
(i) All amounts allocated to a Participant's
Elective Account may be treated as a Directed
Investment Account pursuant to Section 4.13.
(j) Employer Elective Contributions made
pursuant to this Section may be segregated into a
separate account for each Participant in a federally
insured savings account, certificate of deposit in a
bank or savings and loan association, money market
certificate, or other short-term debt security
acceptable to the Trustee until such time as the
allocations pursuant to Section 4.4 have been made.
(k) The Employer and the Administrator shall
implement the salary reduction elections provided for
herein in accordance with the following:
(1) A Participant may commence making elective
deferrals to the Plan only after first satisfying
the eligibility and participation requirements
specified in Article III. However, the
Participant must make his initial salary deferral
election within a reasonable time, not to exceed
thirty (30) days, after entering the Plan
pursuant to Section 3.3. If the Participant fails
to make an initial salary deferral election
within such time, then such Participant may
thereafter make an election in accordance with
the rules governing modifications. The
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<PAGE> 45
Participant shall make such an election by
entering into a written salary reduction
agreement with the Employer and filing such
agreement with the Administrator. Such election
shall initially be effective beginning with the
pay period following the acceptance of the salary
reduction agreement by the Administrator, shall
not have retroactive effect and shall remain in
force until revoked.
(2) A Participant may modify a prior election on
April 1 or October 1 and concurrently make a new
election by filing a written notice with the
Administrator within a reasonable time before the
pay period for which such modification is to be
effective. However, modifications to a salary
deferral election shall only be permitted
semi-annually, during election periods
established by the Administrator prior to the
first day of a Plan Year and the first day of the
seventh month of a Plan Year. Any modification
shall not have retroactive effect and shall
remain in force until revoked.
(3) A Participant may elect to prospectively
revoke his salary reduction agreement in its
entirety at any time during the Plan Year by
providing the Administrator with thirty (30) days
written notice of such revocation (or upon such
shorter notice period as may be acceptable to the
Administrator). Such revocation shall become
effective as of the beginning of the first pay
period coincident with or next following the
expiration of the notice period. Furthermore, the
termination of the Participant's employment, or
the cessation of participation for any reason,
shall be deemed to revoke any salary reduction
agreement then in effect, effective immediately
following the close of the pay period within
which such termination or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its
contribution to the Plan for each Plan Year within the time
prescribed by law, including extensions of time, for the filing
of the Employer's federal income tax return for the Fiscal Year.
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<PAGE> 46
However, Employer Elective Contributions accumulated
through payroll deductions shall be paid to the Trustee as of the
earliest date on which such contributions can reasonably be
segregated from the Employer's general assets, but in any event
within ninety (90) days from the date on which such amounts would
otherwise have been payable to the Participant in cash. The
provisions of Department of Labor regulations 2510.3-102 are
incorporated herein by reference. Furthermore, any additional
Employer contributions which are allocable to the Participant's
Elective Account for a Plan Year shall be paid to the Plan no
later than the twelve-month period immediately following the
close of such Plan Year.
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and
maintain an account in the name of each Participant to
which the Administrator shall credit as of each
Anniversary Date all amounts allocated to each such
Participant as set forth herein.
(b) The Employer shall provide the Administrator
with all information required by the Administrator to
make a proper allocation of the Employer's
contributions for each Plan Year. Within a reasonable
period of time after the date of receipt by the
Administrator of such information, the Administrator
shall allocate such contribution as follows:
(1) With respect to the Employer's Elective
Contribution made pursuant to Section 4.1(a), to
each Participant's Elective Account in an amount
equal to each such Participant's D&f erred
Compensation for the year.
(2) With respect to the Employer's Non-Elective
Contribution made pursuant to Section 4.1(b), to
each Participant's Account in accordance with
Section 4.1(b).
Any Participant actively employed during the Plan
Year shall be eligible to share in the matching
contribution for the Plan Year.
(3) With respect to the Employer's Non-Elective
Contribution made pursuant to Section 4.1(c), to
each Participant's Account in the same proportion
that each such Participant's Compensation for the
year bears to the total Compensation of all
Participants for such year.
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<PAGE> 47
Only Participants who have completed a Year of
Service during the Plan Year shall be eligible to
share in the discretionary contribution for the
year.
(c) As of each Anniversary Date any amounts
which became Forfeitures since the last Anniversary
Date shall first be made available to reinstate
previously forfeited account balances of Former
Participants, if any, in accordance with Section
6.4(g)(2). The remaining Forfeitures, if any, shall be
allocated to Participants' Accounts and used to reduce
the contribution of the Employer hereunder for the Plan
Year in which such Forfeitures occur in the following
manner:
(1) Forfeitures attributable to Employer
matching contributions made pursuant to Section
4.1(b) shall be used to reduce the Employer's
contribution for the Plan Year in which such
Forfeitures occur.
(2) Forfeitures attributable to Employer
discretionary contributions made pursuant to
Section 4.1(c) shall be added to the Employer's
discretionary contribution for the Plan Year in
which such Forfeitures occur and allocated among
the Participants' Accounts in the same manner as
the Employer's discretionary contributions.
Provided, however, that in the event the
allocation of Forfeitures provided herein shall cause
the "annual addition" (as defined in Section 4.9) to
any Participant's Account to exceed the amount
allowable by the Code, the excess shall be reallocated
in accordance with Section 4.10.
(d) For any Top Heavy Plan Year, Employees not
otherwise eligible to share in the allocation of
contributions and Forfeitures as provided above, shall
receive the minimum allocation provided for in Section
4.4(g) if eligible pursuant to the provisions of
Section 4.4(i).
(e) Notwithstanding the foregoing, Participants
who are not actively employed on the last day of the
Plan Year due to Retirement (Early, Normal or Late),
Total and Permanent Disability or death shall share in
the allocation of contributions and Forfeitures for
that Plan Year.
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<PAGE> 48
(f) On each business day of the Plan Year, a
daily determination of unrealized and realized gains
and losses, interest and dividends will be calculated
and allocated based on the actual activity in each
Participant's account. Activity includes, but is not
limited to, allocation of contribution and forfeitures,
and distributions.
Participants' transfers from other qualified
plans and voluntary contributions deposited in the
general Trust Fund shall share in any earnings and
losses (net appreciation or net depreciation) of the
Trust Fund in the same manner provided above. Each
segregated account maintained on behalf of a
Participant shall be credited or charged with its
separate earnings and losses.
(g) Minimum Allocations Required for Top Heavy
Plan Years: Notwithstanding the foregoing, for any Top
Heavy Plan Year, the sum of the Employer's
contributions and Forfeitures allocated to the
Participant's Combined Account of each Employee shall
be equal to at least three percent (3%) of such
Employee's "415 Compensation" (reduced by contributions
and forfeitures, if any, allocated to each Employee in
any defined contribution plan included with this plan
in a Required Aggregation Group). However, if (1) the
sum of the Employer's contributions and Forfeitures
allocated to the Participant's Combined Account of each
Key Employee for such Top Heavy Plan Year is less than
three percent (3%) of each Key Employee's "415
Compensation" and (2) this Plan is not required to be
included in an Aggregation Group to enable a defined
benefit plan to meet the requirements of Code Section
401(a)(4) or 410, the sum of the Employer's
contributions and Forfeitures allocated to the
Participant's Combined Account of each Employee shall
be equal to the largest percentage allocated to the
Participant's Combined Account of any Key Employee.
However, in determining whether a Non-Key Employee has
received the required minimum allocation, such Non-Key
Employee's Deferred Compensation and matching
contributions needed to satisfy the "Actual
Contribution Percentage" tests pursuant to Section
4.7(a) shall not be taken into account.
However, no such minimum allocation shall be
required in this Plan for any Employee who participates
in another defined contribution plan subject to Code
42
<PAGE> 49
Section 412 providing such benefits included with this
Plan in a Required Aggregation Group.
(h) For purposes of the minimum allocations set
forth above, the percentage allocated to the
Participant's Combined Account of any Key Employee
shall be equal to the ratio of the sum of the
Employer's contributions and Forfeitures allocated on
behalf of such Key Employee divided by the "415
Compensation" for such Key Employee.
(i) For any Top Heavy Plan Year, the minimum
allocations set forth above shall be allocated to the
Participant's Combined Account of all Employees who are
Participants and who are employed by the Employer on
the last day of the Plan Year, including Employees who
have (1) failed to complete a Year of Service; and
(2) declined to make mandatory contributions (if
required) or, in the case of a cash or deferred
arrangement, elective contributions to the Plan.
(j) For the purposes of this Section, "415
Compensation" shall be limited to $200,000. Such amount
shall be adjusted at the same time and in the same
manner as permitted under Code Section 415(d), except
that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year
beginning with or within such calendar year and the
first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year
the "415 Compensation" limit shall be an amount equal
to the "415 Compensation" limit for the calendar year
in which the Plan Year begins multiplied by the ratio
obtained by dividing the number of full months in the
short Plan Year by twelve (12). However, for Plan Years
beginning prior to January 1, 1989, the $200,000 limit
shall apply only for Top Heavy Plan Years and shall not
be adjusted.
(k) Notwithstanding anything herein to the
contrary, Participants who terminated employment for
any reason during the Plan Year shall share in the
salary reduction contributions made by the Employer for
the year of termination without regard to the Hours of
Service credited.
(l) If a Former Participant is reemployed after
five (5) consecutive 1-Year Breaks in Service, then
separate accounts shall be maintained as follows:
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<PAGE> 50
(1) one account for nonforfeitable benefits
attributable to pre-break service; and
(2) one account representing his status in the
Plan attributable to post-break service.
(m) Notwithstanding anything to the contrary,
for Plan Years beginning after December 31, 1989, if
this is a Plan that would otherwise fail to meet the
requirements of Code Sections 401(a)(26), 410(b)(1) or
410(b)(2)(A)(i) and the Regulations thereunder because
Employer contributions would not be allocated to a
sufficient number or percentage of Participants for a
Plan Year, then the following rules shall apply:
(1) The group of Participants eligible to share
in the Employer's contribution and Forfeitures
for the Plan Year shall be expanded to include
the minimum number of Participants who would not
otherwise be eligible as are necessary to satisfy
the applicable test specified above. The specific
Participants who shall become eligible under the
terms of this paragraph shall be those who are
actively employed on the-last day of the Plan
Year and, when compared to similarly situated
Participants, have completed the greatest number
of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above,
the applicable test is still not satisfied, then
the group of Participants eligible to share in
the Employer's contribution and Forfeitures for
the Plan Year shall be further expanded to
include the minimum number of Participants who
are not actively employed on the last day of the
Plan Year as are necessary to satisfy the
applicable test. The specific Participants who
shall become eligible to share shall be those
Participants, when compared to similarly situated
Participants, who have completed the greatest
number of Hours of Service in the Plan Year
before terminating employment.
(3) Nothing in this Section shall permit the
reduction of a Participant's accrued benefit.
Therefore any amounts that have previously been
allocated to Participants may not be reallocated
to satisfy these requirements. In such event, the
Employer shall make an additional contribution
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<PAGE> 51
equal to the amount such affected Participants
would have received had they been included in the
allocations, even if it exceeds the amount which
would be deductible under Code Section 404. Any
adjustment to the allocations pursuant to this
paragraph shall be considered a retroactive
amendment adopted by the last day of the Plan
Year.
(4) Notwithstanding the foregoing, for any Top
Heavy Plan Year beginning after December 31,
1992, if the portion of the Plan which is not a
Code Section 401(k) or 401(m) plan would fail to
satisfy Code Section 410(b) if the coverage tests
were applied by treating those Participants whose
only allocation (under such portion of the Plan)
would otherwise be provided under the top heavy
formula as if they were not currently benefiting
under the Plan, then, for purposes of this
Section 4.4(m), such Participants shall be
treated as not benefiting and shall therefore be
eligible to be included in the expanded class of
Participants who will share in the allocation
provided under the Plan's non top heavy formula.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan
Year beginning after December 31, 1986, the annual
allocation derived from Employer Elective Contributions
to a Participant's Elective Account shall satisfy one
of the following tests:
(1) The "Actual Deferral Percentage" for the
Highly Compensated Participant group shall not be
more than the "Actual Deferral Percentage" of the
Non-Highly Compensated Participant group
multiplied by 1.25, or
(2) The excess of the "Actual Deferral
Percentage" for the Highly Compensated
Participant group over the "Actual Deferral
Percentage" for the Non-Highly Compensated
Participant group shall not be more than two
percentage points. Additionally, the "Actual
Deferral Percentage" for the Highly Compensated
Participant group shall not exceed the "Actual
Deferral Percentage" for the Non-Highly
Compensated Participant group multiplied by 2.
45
<PAGE> 52
The provisions of Code Section 401(k)(3) and
Regulation 1.401(k)-1(b) are incorporated herein
by reference.
However, for Plan Years beginning after
December 31, 1988, in order to prevent the
multiple use of the alternative method described
in (2) above and in Code Section 401(m)(9)(A),
any Highly Compensated Participant eligible to
make elective deferrals pursuant to Section 4.2
and to make Employee contributions or to receive
matching contributions under this Plan or under
any other plan maintained by the Employer or an
Affiliated Employer shall have his actual
contribution ratio reduced pursuant to Regulation
1.401(m)-2, the provisions of which are
incorporated herein by reference.
(b) For the purposes of this Section "Actual
Deferral Percentage" means, with respect to the Highly
Compensated Participant group and Non-Highly
Compensated Participant group for a Plan Year, the
average of the ratios, calculated separately for each
Participant in such group, of the amount of Employer
Elective Contributions allocated to each Participant's
Elective Account for such Plan Year, to such
Participant's "414(s) Compensation" for such Plan Year.
The actual deferral ratio for each Participant and the
"Actual Deferral Percentage" for each group shall be
calculated to the nearest one-hundredth of one percent
for Plan Years beginning after December 31, 1988.
Employer Elective Contributions allocated to each
Non-Highly Compensated Participant's Elective Account
shall be reduced by Excess Deferred Compensation to the
extent such excess amounts are made under this Plan or
any other plan maintained by the Employer.
(c) For the purpose of determining the actual
deferral ratio of a Highly Compensated Employee who is
subject to the Family Member aggregation rules of Code
Section 414(q)(6) because-such Participant is either a
"five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest
"415 Compensation" during the year, the following shall
apply:
(1) The combined actual deferral ratio for the
family group (which shall be treated as one
Highly Compensated Participant) shall be
46
<PAGE> 53
determined by aggregating Employer Elective
Contributions and "414(s) Compensation" of all
eligible Family Members (including Highly
Compensated Participants). However, in applying
the $200,000 limit to "414(s) Compensation", for
Plan Years beginning after December 31, 1988,
Family Members shall include only the affected
Employee's spouse and any lineal descendants who
have not attained age 19 before the close of the
Plan Year. Notwithstanding the foregoing, with
respect to Plan Years beginning prior to
January 1, 1990, compliance with the Regulations
then in effect shall be deemed to be compliance
with this paragraph.
(2) The Employer Elective Contributions and
"414(s) Compensation" of all Family Members shall
be disregarded for purposes of determining the
"Actual Deferral Percentage" of the Non-Highly
Compensated Participant group except to the
extent taken into account in paragraph (1) above.
(3) If a Participant is required to be
aggregated as a member of more than one family
group in a plan, all Participants who are members
of those family groups that include the
Participant are aggregated as one family group in
accordance with paragraphs (1) and (2) above.
(d) For the purposes of Sections 4.5(a) and 4.6,
a Highly Compensated Participant and a Non-Highly
Compensated Participant shall include any Employee
eligible to make a deferral election pursuant to
Section 4.2, whether or not such deferral election was
made or suspended pursuant to Section 4.2.
(e) For the purposes of this Section and Code
Sections 401(a)(4), 410(b) and 401(k), if two or more
plans which include cash or deferred arrangements are
considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section
410(b)(2)(A)(ii) as in effect for Plan Years beginning
after December 31, 1988), the cash or deferred
arrangements included in such plans shall be treated as
one arrangement. In addition, two or more cash or
deferred arrangements may be considered as a single
arrangement f or purposes of determining whether or not
such arrangements satisfy Code Sections 401(a)(4),
410(b) and 401(k). In such a case, the cash or deferred
47
<PAGE> 54
arrangements included in such plans and the plans
including such arrangements shall be treated as one
arrangement and as one plan for purposes of this
Section and Code Sections 401(a)(4), 410(b) and 401(k).
Plans may be aggregated under this paragraph (e) only
if they have the same plan year.
Notwithstanding the above, for Plan Years
beginning after December 31, 1988, an employee stock
ownership plan described in Code Section 4975(e)(7) or
409 may not be combined with this Plan for purposes of
determining whether the employee stock ownership plan
or this Plan satisfies this Section and Code Sections
401(a)(4), 410(b) and 401(k).
(f) For the purposes of this Section, if a
Highly Compensated Participant is a Participant under
two or more cash or deferred arrangements (other than a
cash or deferred arrangement which is part of an
employee stock ownership plan as defined in Code
Section 4975(e)(7) or 409 for Plan Years beginning
after December 31, 1988) of the Employer or an
Affiliated Employer, all such cash or deferred
arrangements shall be treated as one cash or deferred
arrangement for the purpose of determining the actual
deferral ratio with respect to such Highly Compensated
Participant. However, for Plan Years beginning after
December 31, 1988, if the cash or deferred arrangements
have different plan years, this paragraph shall be
applied by treating all cash or deferred arrangements
ending with or within the same calendar year as a
single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the
Employer's Elective Contributions made pursuant to Section 4.4 do
not satisfy one of the tests set forth in Section 4.5(a) for Plan
Years beginning after December 31, 1986, the Administrator shall
adjust Excess Contributions pursuant to the options set forth
below:
(a) On or before the fifteenth day of the third
month following the end of each Plan Year, the Highly
Compensated Participant having the highest actual
deferral ratio shall have his portion of Excess
Contributions distributed to him and/or at his election
recharacterized as a voluntary Employee contribution
pursuant to Section 4.12 until one of the tests set
48
<PAGE> 55
forth in Section 4.5(a) is satisfied, or until his
actual deferral ratio equals the actual deferral ratio
of the Highly Compensated Participant having the second
highest actual deferral ratio. This process shall
continue until one of the tests set forth in Section
4.5(a) is satisfied. For each Highly Compensated
Participant, the amount of Excess Contributions is
equal to the Elective Contributions on behalf of such
Highly Compensated Participant (determined prior to the
application of this paragraph) minus the amount
determined by multiplying the Highly Compensated
Participant's actual deferral ratio (determined after
application of this paragraph) by his "414(s)
Compensation". However, in determining the amount of
Excess Contributions to be distributed and/or
recharacterized with respect to an affected Highly
Compensated Participant as determined herein, such
amount shall be reduced by any Excess Deferred
Compensation previously distributed to such affected
Highly Compensated Participant for his taxable year
ending with or within such Plan Year.
(1) With respect to the distribution of Excess
Contributions pursuant to (a) above, such
distribution:
(i) may be postponed but not later than the
close of the Plan Year following the Plan
Year to which they are allocable;
(ii) shall be made simultaneously from
Deferred Compensation and matching
contributions which relate to such Deferred
Compensation provided, however, that any
such matching contributions which are not
Vested shall.be forfeited in lieu of
distribution;
(iii) shall be adjusted for Income; and
(iv) shall be designated by the Employer as
a distribution of Excess Contributions (and
Income).
(2) With respect to the recharacterization of
Excess Contributions pursuant to (a) above, such
recharacterized amounts:
49
<PAGE> 56
(i) shall be deemed to have occurred on the
date on which the last of those Highly
Compensated Participants with Excess
Contributions to be recharacterized is
notified of the recharacterization and the
tax consequences of such recharacterization;
(ii) shall not exceed the amount of
Deferred Compensation on behalf of any
Highly Compensated Participant for any Plan
Year;
(iii) shall be treated as voluntary
Employee contributions for purposes of Code
Section 401(a)(4) and Regulation
1.401(k)-1(b). However, for purposes of
Sections 2.2 and 4.4(g), recharacterized
Excess Contributions continue to be treated
as Employer contributions that are Deferred
Compensation. For Plan Years beginning after
December 31, 1988, Excess Contributions
recharacterized as voluntary Employee
contributions shall continue to be
nonforfeitable and subject to the same
distribution rules provided for in Section
4.2(c);
(iv) are not permitted if the amount
recharacterized plus voluntary Employee
contributions actually made by such Highly
Compensated Participant, exceed the maximum
amount of voluntary Employee contributions
(determined prior to application of Section
4.7(a)) that such Highly Compensated
Participant is permitted to make under the
Plan in the absence of recharacterization;
and
(v) shall be adjusted for Income.
(3) Any distribution and/or recharacterization
of less than the entire amount of Excess
Contributions shall be treated as a pro rata
distribution and/or recharacterization of Excess
Contributions and Income.
(4) The determination and correction of Excess
Contributions of a Highly Compensated Participant
whose actual deferral ratio is determined under
50
<PAGE> 57
the family aggregation rules shall be
accomplished by reducing the actual deferral
ratio as required herein, and the Excess
Contributions for the family unit shall then be
allocated among the Family Members in proportion
to the Elective Contributions of each Family
Member that were combined to determine the group
actual deferral ratio. Notwithstanding the
foregoing, with respect to Plan Years beginning
prior to January 1, 1990, compliance with the
Regulations then in effect shall be deemed to be
compliance with this paragraph.
(b) Within twelve (12) months after the end of
the Plan Year, the Employer may make a special
Qualified Non-Elective Contribution on behalf of
Non-Highly Compensated Participants in an amount
sufficient to satisfy one of the tests set forth in
Section 4.5(a). Such contribution shall be allocated to
the Participant's Elective Account of each Non-Highly
Compensated Participant in the same proportion that
each Non-Highly Compensated Participant's Compensation
for the year bears to the total Compensation of all
Non-Highly Compensated Participants.
(c) If during a Plan Year the projected
aggregate amount of Elective Contributions to be
allocated to all Highly Compensated Participants under
this Plan would, by virtue of the tests set forth in
Section 4.5(a), cause the Plan to fail such tests, then
the Administrator may automatically reduce
proportionately or in the order provided in Section
4.6(a) each affected Highly Compensated Participant's
deferral election made pursuant to Section 4.2 by an
amount necessary to satisfy one of the tests set forth
in Section 4.5(a).
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for
Plan Years beginning after December 31, 1986 for the
Highly Compensated Participant group shall not exceed
the greater of:
(1) 125 percent of such percentage for the
Non-Highly Compensated Participant group; or
(2) the lesser of 200 percent of such percentage
for the Non-Highly Compensated Participant group,
51
<PAGE> 58
or such percentage for the Non-Highly Compensated
Participant group plus 2 percentage points.
However, for Plan Years beginning after
December 31, 1988, to prevent the multiple use of
the alternative method described in this
paragraph and Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make
elective deferrals pursuant to Section 4.2 or any
other cash or deferred arrangement maintained by
the Employer or an Affiliated Employer and to
make Employee contributions or to receive
matching contributions under this Plan or under
any other plan maintained by the Employer or an
Affiliated Employer shall have his actual
contribution ratio reduced pursuant to Regulation
1.401(m)-2. The provisions of Code Section 401(m)
and Regulations 1.401(m)-1(b) and 1.401(m)-2 are
incorporated herein by reference.
(b) For the purposes of this Section and Section
4.8, "Actual Contribution Percentage" for a Plan Year
means, with respect to the Highly Compensated
Participant group and Non-Highly Compensated
Participant group, the average of the ratios
(calculated separately for each Participant in each
group) of:
(1) the sum of Employer matching contributions
made pursuant to Section 4.1(b), voluntary
Employee contributions made pursuant to Section
4.12 and Excess Contributions recharacterized as
voluntary Employee contributions pursuant to
Section 4.6(a) on behalf of each such Participant
for such Plan Year; to
(2) the Participant's "414(s) Compensation" for
such Plan Year.
(c) For purposes of determining the "Actual
Contribution Percentage" and the amount of Excess
Aggregate Contributions pursuant to Section 4.8(d),
only Employer matching contributions (excluding
Employer matching contributions forfeited or
distributed pursuant to Sections 4.2(f) and 4.6(a)(1)
or forfeited pursuant to Section 4.8(a)) contributed to
the Plan prior to the end of the succeeding Plan Year
shall be considered. In addition, the Administrator may
elect to take into account, with respect to Employees
eligible to have Employer matching contributions
52
<PAGE> 59
pursuant to Section 4.1(b) or voluntary Employee
contributions pursuant to Section 4.12 allocated to
their accounts, elective deferrals (as defined in
Regulation 1.402(g)-1(b)) and qualified non-elective
contributions (as defined in Code Section 401(m)(4)(C))
contributed to any plan maintained by the Employer.
Such elective deferrals and qualified non-elective
contributions shall be treated as Employer matching
contributions subject to Regulation 1.401(m)-1(b)(5)
which is incorporated herein by reference. However, for
Plan Years beginning after December 31, 1988, the Plan
Year must be the same as the plan year of the plan to
which the elective deferrals and the qualified
non-elective contributions are made.
(d) For the purpose of determining the actual
contribution ratio of a Highly Compensated Employee who
is subject to the Family Member aggregation rules of
Code Section 414(q)(6) because such Employee is either
a "five percent owner" of the Employer or one of the
ten (10) Highly Compensated Employees paid the greatest
"415 Compensation" during the year, the following shall
apply:
(1) The combined actual contribution ratio for
the family group (which shall be treated as one
Highly Compensated Participant) shall be
determined by aggregating Employer matching
contributions made pursuant to Section 4.1(b),
voluntary Employee contributions made pursuant to
Section 4.12, Excess Contributions
recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) and
"414(s) Compensation" of all eligible Family
Members (including Highly Compensated
Participants). However, in applying the $200,000
limit to "414(s) Compensation" for Plan Years
beginning after December 31, 1988, Family Members
shall include only the affected Employee's spouse
and any lineal descendants who have not attained
age 19 before the close of the Plan Year.
Notwithstanding the foregoing, with respect to
Plan Years beginning prior to January 1, 1990,
compliance with the Regulations then in effect
shall be deemed to be compliance with this
paragraph.
(2) The Employer matching contributions made
pursuant to Section 4.1(b), voluntary Employee
53
<PAGE> 60
contributions made pursuant to Section 4.12,
Excess Contributions recharacterized as voluntary
Employee contributions pursuant to Section 4.6(a)
and "414(s) Compensation" of all Family Members
shall be disregarded for purposes of determining
the "Actual Contribution Percentage" of the
Non-Highly Compensated Participant group except
to the extent taken into account in paragraph (1)
above.
(3) If a Participant is required to be
aggregated as a member of more than one family
group in a plan, all Participants who are members
of those family groups that include the
Participant are aggregated as one family group in
accordance with paragraphs (1) and (2) above.
(e) For purposes of this Section and Code
Sections 401(a)(4), 410(b) and 401(m), if two or more
plans of the Employer to which matching contributions,
Employee contributions, or both, are made are treated
as one plan for purposes of Code Sections 401(a)(4) or
410(b) (other than the average benefits test under Code
Section 410(b)(2)(A)(ii) as in effect for Plan Years
beginning after December 31, 1988), such plans shall be
treated as one plan. In addition, two or more plans of
the Employer to which matching contributions, Employee
contributions, or both, are made may be considered as a
single plan for purposes of determining whether or not
such plans satisfy Code Sections 401(a)(4), 410(b) and
401(m). In such a case, the aggregated plans must
satisfy this Section and Code Sections 401(a)(4),
410(b) and 401(m) as though such aggregated plans were
a single plan. Plans may be aggregated under this
paragraph (e) for Plan Years beginning after
December 31, 1988, only if they have the same plan year.
Notwithstanding the above, for Plan Years
beginning after December 31, 1988, an employee stock
ownership plan described in Code Section 4975(e)(7) or
409 may not be aggregated with this Plan for purposes
of determining whether the employee stock ownership
plan or this Plan satisfies this Section and Code
Sections 401(a)(4), 410(b) and 401(m).
(f) If a Highly Compensated Participant is a
Participant under two or more plans (other than an
employee stock ownership plan as defined in Code
Section 4975(e)(7) or 409 for Plan Years beginning
54
<PAGE> 61
after December 31, 1988) which are maintained by the
Employer or an Affiliated Employer to which matching
contributions, Employee contributions, or both, are
made, all such contributions on behalf of such Highly
Compensated Participant shall be aggregated for
purposes of determining such Highly Compensated
Participant's actual contribution ratio. However, for
Plan Years beginning after December 31, 1988, if the
plans have different plan years, this paragraph shall
be applied by treating all plans ending with or within
the same calendar year as a single plan.
(g) For purposes of Sections 4.7(a) and 4.8, a
Highly Compensated Participant and Non-Highly
Compensated Participant shall include any Employee
eligible to have Employer matching contributions
pursuant to Section 4.1(b) (whether or not a deferral
election was made or suspended pursuant to Section
4.2(e)) or voluntary Employee contributions pursuant to
Section 4.12 (whether or not voluntary Employee
contributions are made) allocated to his account for
the Plan Year.
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that, for Plan Years beginning
after December 31, 1986, the "Actual Contribution
Percentage" for the Highly Compensated Participant
group exceeds the "Actual Contribution Percentage" for
the Non-Highly Compensated Participant group pursuant
to Section 4.7(a), the Administrator (on or before the
fifteenth day of the third month following the end of
the Plan Year, but in no event later than the close of
the following Plan Year) shall direct the Trustee to
distribute to the Highly Compensated Participant having
the highest actual contribution ratio, his Vested
portion of Excess Aggregate Contributions (and Income
allocable to such contributions) and, if forfeitable,
forfeit such non-Vested Excess Aggregate Contributions
attributable to Employer matching contributions (and
Income allocable to such forfeitures) until either one
of the tests set forth in Section 4.7(a) is satisfied,
or until his actual contribution ratio equals the
actual contribution ratio of the Highly Compensated
Participant having the second highest actual
contribution ratio. This process shall continue until
one of the tests set forth in Section 4.7(a) is
satisfied. The distribution and/or forfeiture of Excess
Aggregate Contributions shall be made in the following
order:
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<PAGE> 62
(1) Voluntary Employee contributions including
Excess Contributions recharacterized as voluntary
Employee contributions pursuant to Section
4.6(a)(2);
(2) Employer matching contributions.
If the correction of Excess Aggregate
Contributions attributable to Employer matching
contributions is not in proportion to the Vested and
non-Vested portion of such contributions, then the
Vested portion of the Participant's Account
attributable to Employer matching contributions after
the correction shall be subject to Section 6.5(g).
(b) Any distribution and/or forfeiture of less
than the entire amount of Excess Aggregate
Contributions (and Income) shall be treated as a
pro rata distribution and/or forfeiture of Excess
Aggregate Contributions and Income. Distribution of
Excess Aggregate Contributions shall be designated by
the Employer as a distribution of Excess Aggregate
Contributions (and Income). Forfeitures of Excess
Aggregate Contributions shall be treated in accordance
with Section 4.4.
(c) Excess Aggregate Contributions attributable
to amounts other than voluntary Employee contributions,
including forfeited matching contributions, shall be
treated as Employer contributions for purposes of Code
Sections 404 and 415 even if distributed from the Plan.
Forfeited matching contributions that are
reallocated to Participants' Accounts for the Plan Year
in which the forfeiture occurs shall be treated as an
"annual addition" pursuant to Section 4.9(b) for the
Participants to whose Accounts they are reallocated and
for the Participants from whose Accounts they are
forfeited.
(d) For each Highly Compensated Participant, the
amount of Excess Aggregate Contributions is equal to
the Employer matching contributions made pursuant to
Section 4.1(b), voluntary Employee contributions made
pursuant to Section 4.12, Excess Contributions
recharacterized as voluntary Employee contributions
pursuant to Section 4.6(a) and any qualified
non-elective contributions or elective deferrals taken
into account pursuant to Section 4.7(c) on behalf of
56
<PAGE> 63
the Highly Compensated Participant (determined prior to
the application of this paragraph) minus the amount
determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined
after application of this paragraph) by his "414(s)
Compensation". The actual contribution ratio must be
rounded to the nearest one-hundredth of one percent for
Plan Years beginning after December 31, 1988. In no
case shall the amount of Excess Aggregate Contribution
with respect to any Highly Compensated Participant
exceed-the amount of Employer matching contributions
made pursuant to Section 4.1(b), voluntary Employee
contributions made pursuant to Section 4.12, Excess
Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) and any
qualified non-elective contributions or elective
deferrals taken into account pursuant to Section 4.7(c)
on behalf of such Highly Compensated Participant for
such Plan Year.
(e) The determination of the amount of Excess
Aggregate Contributions with respect to any Plan Year
shall be made after first determining the Excess
Contributions, if any, to be treated as voluntary
Employee contributions due to recharacterization for
the plan year of any other qualified cash or deferred
arrangement (as defined in Code Section 401(k))
maintained by the Employer that ends with or within the
Plan Year or which are treated as voluntary Employee
contributions due to recharacterization pursuant to
Section 4.6(a).
(f) If the determination and correction of
Excess Aggregate Contributions of a Highly Compensated
Participant whose actual contribution ratio is
determined under the family aggregation rules, then the
actual contribution ratio shall be reduced and the
Excess Aggregate Contributions for the family unit
shall be allocated among the Family Members in
proportion to the sum of Employer matching
contributions made pursuant to Section 4.1(b),
voluntary Employee contributions made pursuant to
Section 4.12, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section
4.6(a) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to
Section 4.7(c) of each Family Member that were combined
to determine the group actual contribution ratio.
Notwithstanding the foregoing, with respect to Plan
Years beginning prior to January 1, 1990, compliance
57
<PAGE> 64
with the Regulations then in effect shall be deemed to
be compliance with this paragraph.
(g) If during a Plan Year the projected
aggregate amount of Employer matching contributions,
voluntary Employee contributions and Excess
Contributions recharacterized as voluntary Employee
contributions to be allocated to all Highly Compensated
Participants under this Plan would, by virtue of the
tests set forth in Section 4.7(a), cause the Plan to
fail such tests, then the Administrator may
automatically reduce proportionately or in the order
provided in Section 4.8(a) each affected Highly
Compensated Participant's projected share of such
contributions by an amount necessary to satisfy one of
the tests set forth in Section 4.7(a).
(h) Notwithstanding the above, within twelve
(12) months after the end of the Plan Year, the
Employer may make a special Qualified Non-Elective
Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy one of
the tests set forth in Section 4.7(a). Such
contribution shall be allocated to the Participant's
Elective Account of each Non-Highly Compensated
Participant in the same proportion that each Non-Highly
Compensated Participant's Compensation for the year
bears to the total Compensation of all Non-Highly
Compensated Participants. A separate accounting shall
be maintained for the purpose of excluding such
contributions from the "Actual Deferral Percentage"
tests pursuant to Section 4.5(a).
4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum
"annual additions" credited to a Participant's accounts
for any "limitation year" shall equal the lesser of:
(1) $30,000 (or, if greater, one-fourth of the dollar
limitation in effect under Code Section 415(b)(1)(A))
or (2) twenty-five percent (25%) of the Participant's
"415 Compensation" for such "limitation year". For any
short "limitation year", the dollar limitation in (1)
above shall be reduced by a fraction, the numerator of
which is the number of full months in the short
"limitation year" and the denominator of which is
twelve (12).
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<PAGE> 65
(b) For purposes of applying the limitations of
Code Section 415, "annual additions" means the sum
credited to a Participant's accounts for any
"limitation year" of (1) Employer contributions,
(2) Employee contributions for "limitation years"
beginning after December 31, 1986, (3) forfeitures,
(4) amounts allocated, after March 31, 1984, to an
individual medical account, as defined in Code Section
415(l)(2) which is part of a pension or annuity plan
maintained by the Employer and (5) amounts derived from
contributions paid or accrued after December 31, 1985,
in taxable years ending after such date, which are
attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as
defined in Code Section 419A(d)(3)) under a welfare
benefit plan (as defined in Code Section 419(e))
maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in
paragraph (a)(2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning
of Code Section 419A(f)(2)) after separation from
service which is otherwise treated as an "annual
addition", or (2) any amount otherwise treated as an
"annual addition" under Code Section 415(l)(1).
(c) For purposes of applying the limitations of
Code Section 415, the transfer of funds from one
qualified plan to another is not an "annual addition".
In addition, the following are not Employee
contributions for the purposes of Section 4.9(b)(2):
(1) rollover contributions (as defined in Code Sections
402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3));
(2) repayments of loans made to a Participant from the
Plan; (3) repayments of distributions received by an
Employee pursuant to Code Section 411(a)(7)(B)
(cash-outs); (4) repayments of distributions received
by an Employee pursuant to Code Section 411(a)(3)(D)
(mandatory contributions); and (5) Employee
contributions to a simplified employee pension
excludable from gross income under Code Section
408(k)(6).
(d) For purposes of applying the limitations of
Code Section 415, the "limitation year" shall be the
Plan Year.
(e) The dollar limitation under Code Section
415(b)(1)(A) stated in paragraph (a)(1) above shall be
adjusted annually as provided in Code Section 415(d)
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pursuant to the Regulations. The adjusted limitation is
effective as of January 1st of each calendar year and
is applicable to "limitation years" ending with or
within that calendar year.
(f) For the purpose of this Section, all
qualified defined benefit plans (whether terminated or
not) ever maintained by the Employer shall be treated
as one defined benefit plan, and all qualified defined
contribution plans (whether terminated or not) ever
maintained by the Employer shall be treated as one
defined contribution plan.
(g) For the purpose of this Section, if the
Employer is a member of a controlled group of
corporations, trades or businesses under common control
(as defined by Code Section 1563(a) or Code Section
414(b) and (c) as modified by Code Section 415(h)), is
a member of an affiliated service group (as defined by
Code Section 414(m)), or is a member of a group of
entities required to be aggregated pursuant to
Regulations under Code Section 414(o), all Employees of
such Employers shall be considered to be employed by a
single Employer.
(h) For the purpose of this Section, if this
Plan is a Code Section 413(c) plan, all Employers of a
Participant who maintain this Plan will be considered
to be a single Employer.
(i)(1) If a Participant participates in more
than one defined contribution plan maintained by the
Employer which have different Anniversary Dates, the
maximum "annual additions" under this Plan shall equal
the maximum "annual additions" for the "limitation
year" minus any "annual additions" previously credited
to such Participant's accounts during the "limitation
year".
(2) If a Participant participates in both a
defined contribution plan subject to Code Section
412 and a defined contribution plan not subject
to Code Section 412 maintained by the Employer
which have the same Anniversary Date, "annual
additions" will be credited to the Participant's
accounts under the defined contribution plan
subject to Code Section 412 prior to crediting
"annual additions" to the Participant's accounts
under the defined contribution plan not subject
to Code Section 412.
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<PAGE> 67
(3) If a Participant participates in more than
one defined contribution plan not subject to Code
Section 412 maintained by the Employer which have
the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the
product of (A) the maximum "annual additions" for
the "limitation year" minus any "annual
additions" previously credited under
subparagraphs (1) or (2) above, multiplied by
(B) a fraction (i) the numerator of which is the
"annual additions" which would be credited to
such Participant's accounts under this Plan
without regard to the limitations of Code Section
415 and (ii) the denominator of which is such
"annual additions" for all plans described in
this subparagraph.
(j) If an Employee is (or has been) a
Participant in one or more defined benefit plans and
one or more defined contribution plans maintained by
the Employer, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for
any "limitation year" may not exceed 1.0.
(k) The defined benefit plan fraction for any
"limitation year" is a fraction, the numerator of which
is the sum of the Participant's projected annual
benefits under all the defined benefit plans (whether
or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125 percent of
the dollar limitation determined for the "limitation
year" under Code Sections 415(b) and (d) or 140 percent
of the highest average compensation, including any
adjustments under Code Section 415(b).
Notwithstanding the above, if the
Participant was a Participant as of the first day of
the first "limitation year" beginning after
December 31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on
May 6, 1986, the denominator of this fraction will not
be less than 125 percent of the sum of the annual
benefits under such plans which the Participant had
accrued as of the close of the last "limitation year"
beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after
May 5, 1986. The preceding sentence applies only if the
defined benefit plans individually and in the aggregate
satisfied the requirements of Code Section 415 for all
"limitation years" beginning before January 1, 1987.
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<PAGE> 68
(1) The defined contribution plan fraction for
any "limitation year" is a fraction, the numerator of
which is the sum of the annual additions to the
Participant's Account under all the defined
contribution plans (whether or not terminated)
maintained by the Employer for the current and all
prior "limitation years" (including the annual
additions attributable to the Participant's
nondeductible Employee contributions to all defined
benefit plans, whether or not terminated, maintained by
the Employer, and the annual additions attributable to
all welfare benefit funds, as defined in Code Section
419(e), and individual medical accounts, as defined in
Code Section 415(l)(2), maintained by the Employer),
and the denominator of which is the sum of the maximum
aggregate amounts for the current and all prior
"limitation years" of service with the Employer
(regardless of whether a defined contribution plan was
maintained by the Employer). The maximum aggregate
amount in any "limitation year" is the lesser of 125
percent of the dollar limitation determined under Code
Sections 415(b) and (d) in effect under Code Section
415(c)(1)(A) or 35 percent of the Participant's
Compensation for such year.
If the Employee was a Participant as of the
end of the first day of the first "limitation year"
beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer
which were in existence on May 6, 1986, the numerator
of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, an amount equal to the product of
(1) the excess of the sum of the fractions over 1.0
times (2) the denominator of this fraction, will be
permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of
the last "limitation year" beginning before January 1,
1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but
using the Code Section 415 limitation applicable to the
first "limitation year" beginning on or after
January 1, 1987. The annual addition for any
"limitation year" beginning before January 1, 1987
shall not be recomputed to treat all Employee
contributions as annual additions.
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(m) Notwithstanding the foregoing, for any
"limitation year" in which the Plan is a Top Heavy
Plan, 100 percent shall be substituted for 125 percent
in Sections 4.9(k) and 4.9(l) unless the extra minimum
allocation is being provided pursuant to Section 4.4.
However, for any "limitation year" in which the Plan is
a Super Top Heavy Plan, 100 percent shall be
substituted for 125 percent in any event.
(n) Notwithstanding anything contained in this
Section to the contrary, the limitations, adjustments
and other requirements prescribed in this Section shall
at all times comply with the provisions of Code Section
415 and the Regulations thereunder, the terms of which
are specifically incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of
Forfeitures, a reasonable error in estimating a
Participant's Compensation, a reasonable error in
determining the amount of elective deferrals (within
the meaning of Code Section 402(g)(3)) that may be made
with respect to any Participant under the limits of
Section 4.9 or other facts and circumstances to which
Regulation 1.415-6(b)(6) shall be applicable, the
"annual additions" under this Plan would cause the
maximum "annual additions" to be exceeded for any
Participant, the Administrator shall (1) distribute any
elective deferrals (within the meaning of Code Section
402(g)(3)) or return any voluntary Employee
contributions credited for the "limitation year" to the
extent that the return would reduce the "excess amount"
in the Participant's accounts (2) hold any "excess
amount" remaining after the return of any elective
deferrals or voluntary Employee contributions in a
"Section 415 suspense account" (3) use the "Section 415
suspense account" in the next "limitation year" (and
succeeding "limitation years" if necessary) to reduce
Employer contributions for that Participant if that
Participant is covered by the Plan as of the end of the
"limitation year", or if the Participant is not so
covered, allocate and reallocate the "Section 415
suspense account" in the next "limitation year" (and
succeeding "limitation years" if necessary) to all
Participants in the Plan before any Employer or
Employee contributions which would constitute "annual
additions" are made to the Plan for such "limitation
year" (4) reduce Employer contributions to the Plan for
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<PAGE> 70
such "limitation year" by the amount of the "Section
415 suspense account" allocated and reallocated during
such "limitation year".
(b) For purposes of this Article, "excess
amount" for any Participant for a "limitation year"
shall mean the excess, if any, of (1) the "annual
additions" which would be credited to his account under
the terms of the Plan without regard to the limitations
of Code Section 415 over (2) the maximum "annual
additions" determined pursuant to Section 4.9.
(c) For purposes of this Section, "Section 415
suspense account" shall mean an unallocated account
equal to the sum of "excess amounts" for all
Participants in the Plan during the "limitation year".
The "Section 415 suspense account" shall not share in
any earnings or losses of the Trust Fund.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator,
amounts may be transferred from other qualified plans
by Employees, provided that the trust from which such
funds are transferred permits the transfer to be made
and the transfer will not jeopardize the tax exempt
status of the Plan or Trust or create adverse tax
consequences for the Employer. The amounts transferred
shall be set up in a separate account herein referred
to as a "Participant's Rollover Account". Such account
shall be fully Vested at all times and shall not be
subject to Forfeiture for any reason.
(b) Amounts in a Participant's Rollover Account
shall be held by the Trustee pursuant to the provisions
of this Plan and may not be withdrawn by, or
distributed to the Participant, in whole or in part,
except as provided in paragraphs (c) and (d) of this
Section.
(c) Except as permitted by Regulations
(including Regulation 1.411(d)-4), amounts attributable
to elective contributions (as defined in Regulation
1.401(k)-1(g)(3)), including amounts treated as
elective contributions, which are transferred from
another qualified plan in a plan-to-plan transfer shall
be subject to the distribution limitations provided for
in Regulation 1.401(k)-1(d).
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(d) At Normal Retirement Date, or such other
date when the Participant or his Beneficiary shall be
entitled to receive benefits, the fair market value of
the Participant's Rollover Account shall be used to
provide additional benefits to the Participant or his
Beneficiary. Any distributions of amounts held in a
Participant's Rollover Account shall be made in a
manner which is consistent with and satisfies the
provisions of Section 6.5, including, but not limited
to, all notice and consent requirements of Code
Sections 417 and 411(a)(11) and the Regulations
thereunder. Furthermore, such amounts shall be
considered as part of a Participant's benefit in
determining whether an involuntary cash-out of benefits
without Participant consent may be made.
(e) The Administrator may direct that employee
transfers made after a valuation date be segregated
into a separate account for each Participant in a
federally insured savings account, certificate of
deposit in a bank or savings and loan association,
money market certificate, or other short term debt
security acceptable to the Trustee until such time as
the allocations pursuant to this Plan have been made,
at which time they may remain segregated or be invested
as part of the general Trust Fund, to be determined by
the Administrator.
(f) All amounts allocated to a Participant's
Rollover Account may be treated as a Directed
Investment Account pursuant to Section 4.13.
(g) For purposes of this Section, #he term
"qualified plan" shall mean any tax qualified plan
under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean:
(i) amounts transferred to this Plan directly from
another qualified plan; (ii) lump-sum distributions
received by an Employee from another qualified plan
which are eligible for tax free rollover to a qualified
plan and which are transferred by the Employee to this
Plan within sixty (60) days following his receipt
thereof; (iii) amounts transferred to this Plan from a
conduit individual retirement account provided that the
conduit individual retirement account has no assets
other than assets which (A) were previously distributed
to the Employee by another qualified plan as a lump-sum
distribution (B) were eligible for tax-free rollover to
a qualified plan and (C) were deposited in such conduit
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individual retirement account within sixty (60) days of
receipt thereof and other than earnings on said assets;
and (iv) amounts distributed to the Employee from a
conduit individual retirement account meeting the
requirements of clause (iii) above, and transferred by
the Employee to this Plan within sixty (60) days of his
receipt thereof from such conduit individual retirement
account.
(h) Prior to accepting any transfers to which
this Section applies, the Administrator may require the
Employee to establish that the amounts to be
transferred to this Plan meet the requirements of this
Section and may also require the Employee to provide an
opinion of counsel satisfactory to the Employer that
the amounts to be transferred meet the requirements of
this Section.
(i) Notwithstanding anything herein to the
contrary, a transfer directly to this Plan from another
qualified plan (or a transaction having the effect of
such a transfer) shall only be permitted if it will not
result in the elimination or reduction of any "Section
411(d)(6) protected benefit" as described in Section
8.1.
4.12 VOLUNTARY CONTRIBUTIONS
(a) In order to allow Participants the
opportunity to increase their retirement income, each
Participant may, at the discretion of the
Administrator, elect to voluntarily contribute a
portion of his compensation earned while a Participant
under this Plan. Such contributions shall be made via
payroll deduction. Such contributions shall be paid to
the Trustee within a reasonable period of time but in
no event later than ninety (90) days after the receipt
of the contribution. The balance in each Participant's
Voluntary Contribution Account shall be fully Vested at
all times and shall not be subject to Forfeiture for
any reason.
(b) A Participant may elect to withdraw his
voluntary contributions from his Voluntary Contribution
Account and the actual earnings thereon in a manner
which is consistent with and satisfies the provisions
of Section 6.5, including, but not limited to, all
notice and consent requirements of Code Sections 417
and 411(a)(11) and the Regulations thereunder. If the
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Administrator maintains sub-accounts with respect to
voluntary contributions (and earnings thereon) which
were made on or before a specified date, a Participant
shall be permitted to designate which sub-account shall
be the source for his withdrawal.
In the event a Participant has received a
hardship distribution from his Participant's Elective
Account pursuant to Section 6.11 or pursuant to
Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan
maintained by the Employer, then such Participant shall
be barred from making any voluntary contributions to
the Trust Fund for a period of twelve (12) months after
receipt of the distribution.
(c) At Normal Retirement Date, or such other
date when the Participant or his Beneficiary shall be
entitled to receive benefits, the fair market value of
the Voluntary Contribution Account shall be used to
provide additional benefits to the Participant or his
Beneficiary.
(d) The Administrator may direct that voluntary
contributions made after a valuation date be segregated
into a separate account for each Participant in a
federally insured savings account, certificate of
deposit in a bank or savings and loan association,
money market certificate, or other short term debt
security acceptable to the Trustee until such time as
the allocations pursuant to this Plan have been made,
at which time they may remain segregated or be invested
as part of the general Trust Fund, to be determined by
the Administrator.
(e) All amounts allocated to a Voluntary
Contribution Account may be treated as a Directed
Investment Account pursuant to Section 4.13.
4.13 DIRECTED INVESTMENT ACCOUNT
(a) The Administrator, in his sole discretion,
may determine that all Participants be permitted to
direct the Trustee as to the investment of all or a
portion of the interest in any one or more of their
individual account balances. If such authorization is
given, Participants may, subject to a procedure
established by the Administrator and applied in a
uniform nondiscriminatory manner, direct the Trustee in
writing to invest any portion of their account in
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specific assets, specific funds or other investments
permitted under the Plan and the directed investment
procedure. That portion of the account of any
Participant so directing will thereupon be considered a
Directed Investment Account, which shall not share in
Trust Fund earnings.
(b) A separate Directed Investment Account shall
be established for each Participant who has directed an
investment. Transfers between the Participant's regular
account and his Directed Investment Account shall be
charged and credited as the case may be to each
account. The Directed Investment Account shall not
share in Trust Fund earnings, but it shall be charged
or credited as appropriate with the net earnings,
gains, losses and expenses as well as any appreciation
or depreciation in market value during each Plan Year
attributable to such account.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each
Anniversary Date, and at such other date or dates deemed
necessary by the Administrator, herein called "valuation date",
to determine the net worth of the assets comprising the Trust
Fund as it exists on the "valuation date." In determining such
net worth, the Trustee shall value the assets comprising the
Trust Fund at their fair market value as of the "valuation date"
and shall deduct all expenses for which the Trustee has not yet
obtained reimbursement from the Employer or the Trust Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held
in the Trust Fund which are listed on a registered stock
exchange, the Administrator shall direct the Trustee to value the
same at the prices they were last traded on such exchange
preceding the close of business on the "valuation date". If such
securities were not traded on the "valuation date", or if the
exchange on which they are traded was not open for business on
the "valuation date", then the securities shall be valued at the
prices at which they were last traded prior to the "valuation
date". Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on
the "valuation date", which bid price shall be obtained from a
registered broker or an investment banker. In determining the
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fair market value of assets other than securities for which
trading or bid prices can be obtained, the Trustee may appraise
such assets itself, or in its discretion, employ one or more
appraisers for that purpose and rely on the values established by
such appraiser or appraisers.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the
Employer and retire for the purposes hereof on his Normal
Retirement Date or Early Retirement Date. However, a Participant
may postpone the termination of his employment with the Employer
to a later date, in which event the participation of such
Participant in the Plan, including the right to receive
allocations pursuant to Section 4.4, shall continue until his
Late Retirement Date. Upon a Participant's Retirement Date or
attainment of his Normal Retirement Date without termination of
employment with the Employer, or as soon thereafter as is
practicable, the Trustee shall distribute all amounts credited to
such Participant's Combined Account in accordance with Section
6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his
Retirement Date or other termination of his employment,
all amounts credited to such Participant's Combined
Account shall become fully Vested. The Administrator
shall direct the Trustee, in accordance with the
provisions of Sections 6.6 and 6.7, to distribute the
value of the deceased Participant's accounts to the
Participant's Beneficiary.
(b) Upon the death of a Former Participant, the
Administrator shall direct the Trustee, in accordance
with the provisions of Sections 6.6 and 6.7, to
distribute any remaining Vested amounts credited to the
accounts of a deceased Former Participant to such
Former Participant's Beneficiary.
(c) Any security interest held by the Plan by
reason of an outstanding loan to the Participant or
Former Participant shall be taken into account in
determining the amount of the Pre-Retirement Survivor
Annuity.
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(d) The Administrator may require such proper
proof of death and such evidence of the right of any
person to receive payment of the value of the account
of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's
determination of death and of the right of any person
to receive payment shall be conclusive.
(e) Unless otherwise elected in the manner
prescribed in Section 6.6, the Beneficiary of the death
benefit shall be the Participant's spouse, who shall
receive such benefit in the form of a Pre-Retirement
Survivor Annuity pursuant to Section 6.6. Except,
however, the Participant may designate a Beneficiary
other than his spouse if:
(1) the Participant and his spouse have validly
waived the Pre-Retirement Survivor Annuity in the
manner prescribed in Section 6.6, and the spouse
has waived his or her right to be the
Participant's Beneficiary, or
(2) the Participant is legally separated or has
been abandoned (within the meaning of local law)
and the Participant has a court order to such
effect (and there is no "qualified domestic
relations order" as defined in Code Section
414(p). which provides otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a
Beneficiary shall be made on a form satisfactory to the
Administrator. A Participant may at any time revoke his
designation of a Beneficiary or change his Beneficiary
by filing written notice of such revocation or change
with the Administrator. However, the Participant's
spouse must again consent in writing to any change in
Beneficiary unless the original consent acknowledged
that the spouse had the right to limit consent only to
a specific Beneficiary and that the spouse voluntarily
elected to relinquish such right. In the event no valid
designation of Beneficiary exists at the time of the
Participant's death, the death benefit shall be payable
to his estate.
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6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent
Disability prior to his Retirement Date or other termination of
his employment, all amounts credited to such Participant's
Combined Account shall become fully Vested. In the event of a
Participant's Total and Permanent Disability, the Trustee, in
accordance with the provisions of Sections 6.5 and 6.7, shall
distribute to such Participant all amounts credited to such
Participant's Combined Account as though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding
with or subsequent to the termination of a
Participant's employment for any reason other than
death, Total and Permanent Disability or retirement,
the Administrator may direct the Trustee to segregate
the amount of the Vested portion of such Terminated
Participant's Combined Account and invest the aggregate
amount thereof in a separate, federally insured savings
account, certificate of deposit, common or collective
trust fund of a bank or a deferred annuity. In the
event the Vested portion of a Participant's Combined
Account is not segregated, the amount shall remain in a
separate account for the Terminated Participant and
share in allocations pursuant to Section 4.4 until such
time as a distribution is made to the Terminated
Participant.
Distribution of the funds due to a
Terminated Participant shall be made on the occurrence
of an event which would result in the distribution had
the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Total and
Permanent Disability, Early or Normal Retirement).
However, at the election of the Participant, the
Administrator shall direct the Trustee to cause the
entire.Vested portion of the Terminated Participant's
Combined Account to be payable to such Terminated
Participant, as soon as administratively feasible. Any
distribution under this paragraph shall be made in a
manner which is consistent with and satisfies the
provisions of Section 6.5, including, but not limited
to, all notice and consent requirements of Code
Sections 417 and 411(a)(11) and the Regulations
thereunder.
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If the value of a Terminated Participant's
Vested benefit derived from Employer and Employee
contributions does not exceed $3,500 and has never
exceeded $3,500 at the time of any prior distribution,
the Administrator shall direct the Trustee to cause the
entire Vested benefit to be paid to such Participant in
a single lump sum.
For purposes of this Section 6.4, if the
value of a Terminated Participant's Vested benefit is
zero, the Terminated Participant shall be deemed to
have received a distribution of such Vested benefit.
(b) The Vested portion of any Participant's
Account shall be a percentage of the total amount
credited to his Participant's Account determined on the
basis of the Participant's number of Years of Service
according to the following schedule:
Vesting Schedule
Years of Service Percentage
0-2 0%
3 60%
4 80%
5 100%
For vesting purposes only, a Participant shall receive
credit for the number of years of service equal to the number of
whole years of the Participant's period of service from their
date of hire. For purposes of the foregoing, a Participant's
nonconsecutive periods of service must be aggregated, and any
periods of service less than a whole year (whether of not
aggregated) must be aggregated on a basis such that 12 months of
service (30 days are deemed to equal a month) equals a whole year
of service.
Furthermore, for vesting purposes only, if any employee
severs from service by reason of termination, discharge or
retirement, and the employee then performs an hour of service
within twelve (12) months after the employee's severance from
service date, the employee shall not be deemed to have had a
break in service; provided however, that if the employee severs
from service by reason of termination, discharge or retirement
during an absence from service of twelve (12) months or less for
any reason other than termination, discharge, retirement of
death, and then performs an hour of service within twelve (12)
months after the date on which the employee was first absent from
service, the employee shall not be deemed to have had a break in
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service.
(c) Notwithstanding the vesting provided for in
paragraph (b) above, for any Top Heavy Plan Year, the
Vested portion of the Participant's Account of any
Participant who has an Hour of Service after the Plan
becomes top heavy shall be a percentage of the total
amount credited to his Participant's Account determined
on the basis of the Participant's number of Years of
Service according to the following schedule:
Vesting Schedule
Years of Service Percentage
Less than 2 0 %
2 20 %
3 40 %
4 60 %
5 80 %
6 100 %
If in any subsequent Plan Year, the Plan
ceases to be a Top Heavy Plan, the Administrator shall
revert to the vesting schedule in effect before this
Plan became a Top Heavy Plan. Any such reversion shall
be treated as a Plan amendment pursuant to the terms of
the Plan.
(d) Notwithstanding the vesting schedule above,
the Vested percentage of a Participant's Account shall
not be less than the Vested percentage attained as of
the later of the effective date or adoption date of
this amendment and restatement.
(e) Notwithstanding the vesting schedule above,
upon the complete discontinuance of the Employer's
contributions to the Plan or upon any full or partial
termination of the Plan, all amounts credited to the
account of any affected Participant shall become 100%
Vested and shall not thereafter be subject to
Forfeiture.
(f) The computation of a Participant's
nonforfeitable percentage of his interest in the Plan
shall not be reduced as the result of any direct or
indirect amendment to this Plan. For this purpose, the
Plan shall be treated as having been amended if the
Plan provides for an automatic change in vesting due to
a change in top heavy status. In the event that the
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Plan is amended to change or modify any vesting
schedule, a Participant with at least three (3) Years
of Service as of the expiration date of the election
period may elect to have his nonforfeitable percentage
computed under the Plan without regard to such
amendment. If a Participant fails to make such
election, then such Participant shall be subject to the
new vesting schedule. The Participant's election period
shall commence on the adoption date of the amendment
and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written
notice of the amendment from the Employer or
Administrator.
(g)(1) If any Former Participant shall be
reemployed by the Employer before a 1-Year Break in
Service occurs, he shall continue to participate in the
Plan in the same manner as if such termination had not
occurred.
(2) If any Former Participant shall be
reemployed by the Employer before five (5)
consecutive 1-Year Breaks in Service, and such
Former Participant had received, or was deemed to
have received, a distribution of his entire
Vested interest prior to his reemployment, his
forfeited account shall be reinstated only if he
repays the full amount distributed to him before
the earlier of five (5) years after the first
date on which the Participant is subsequently
reemployed by the Employer or the close of the
first period of five (5) consecutive 1-Year
Breaks in Service commencing after the
distribution, or in the event of a deemed
distribution, upon the reemployment of such
Former Participant. In the event the Former
Participant does repay the full amount
distributed to him, or in the event of a deemed
distribution, the undistributed portion of the
Participant's Account must be restored in full,
unadjusted by any gains or losses occurring
subsequent to the Anniversary Date or other
valuation date coinciding with or preceding his
termination. The source for such reinstatement
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shall first be any Forfeitures occurring during
the year. If such source is insufficient, then
the Employer shall contribute an amount which is
sufficient to restore any such forfeited Accounts
provided, however, that if a discretionary
contribution is made for such year pursuant to
Section 4.1(c), such contribution shall first be
applied to restore any such Accounts and the
remainder shall be allocated in accordance with
Section 4.4.
(3) If any Former Participant is reemployed
after a 1-Year Break in Service has occurred,
Years of Service shall include Years of Service
prior to his 1-Year Break in Service subject to
the following rules:
(i) If a Former Participant has a 1-Year
Break in Service, his pre-break and
post-break service shall be used for
computing Years of Service for eligibility
and for vesting purposes only after he has
been employed for one (1) Year of Service
following the date of his reemployment with
the Employer;
(ii) Any Former Participant who under the
Plan does not have a nonforfeitable right to
any interest in the Plan resulting from
Employer contributions shall lose credits
otherwise allowable under (i) above if his
consecutive 1-Year Breaks in Service equal
or exceed the greater of (A) five (5) or
(B) the aggregate number of his pre-break
Years of Service;
(iii) After five (5) consecutive 1-Year
Breaks in Service, a Former Participant's
Vested Account balance attributable to
pre-break service shall not be increased as
a result of post-break service;
(iv) If a Former Participant who has not
had his Years of Service before a 1-Year
Break in Service disregarded pursuant to
(ii) above completes one (1) Year of Service
for eligibility purposes following his
reemployment with the Employer, he shall
participate in the Plan retroactively from
his date of reemployment;
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(v) If a Former Participant who has not had
his Years of Service before a 1-Year Break
in Service disregarded pursuant to (ii)
above completes a Year of Service (a 1-Year
Break in Service previously occurred, but
employment had not terminated), he shall
participate in the Plan retroactively from
the first day of the Plan Year during which
he completes one (1) Year of Service.
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Unless otherwise elected as provided
below, a Participant who is married on the "annuity
starting date" and who does not die before the "annuity
starting date" shall receive the value of all of his
benefits in the form of a joint and survivor annuity.
The joint and survivor annuity is an annuity that
commences immediately and shall be equal in value to a
single life annuity. Such joint and survivor benefits
following the Participant's death shall continue to the
spouse during the spouse's lifetime at a rate equal to
50% of the rate at which such benefits were payable to
the Participant. This joint and 50% survivor annuity
shall be considered the designated qualified joint and
survivor annuity and automatic form of payment for the
purposes of this Plan. However, the Participant may
elect to receive a smaller annuity benefit with
continuation of payments to the spouse at a rate of
seventy-five percent (75%) or one hundred percent
(100%) of the rate payable to a Participant during his
lifetime, which alternative joint and survivor annuity
shall be equal in value to the automatic joint and 50%
survivor annuity. An unmarried Participant shall
receive the value of his benefit in the form of a life
annuity. Such unmarried Participant, however, may elect
in writing to waive the life annuity. The election must
comply with the provisions of this Section as if it
were an election to waive the joint and survivor
annuity by a married Participant, but without the
spousal consent requirement. The Participant may elect
to have any annuity provided for in this Section
distributed upon the attainment of the "earliest
retirement age" under the Plan. The "earliest
retirement age" is the earliest date on which, under
the Plan, the Participant could elect to receive
retirement benefits.
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(2) Any election to waive the joint and survivor
annuity must be made by the Participant in
writing during the election period and be
consented to by the Participant's spouse. If the
spouse is legally incompetent to give consent,
the spouse's legal guardian, even if such
guardian is the Participant, may give consent.
Such election shall designate a Beneficiary (or a
form of benefits) that may not be changed without
spousal consent (unless the consent of the spouse
expressly permits designations by the Participant
without the requirement of further consent by the
spouse) Such spouse's consent shall be
irrevocable and must acknowledge the effect of
such election and be witnessed by a Plan
representative or a notary public. Such consent
shall not be required if it is established to the
satisfaction of the Administrator that the
required consent cannot be obtained because there
is no spouse, the spouse cannot be located, or
other circumstances that may be prescribed by
Regulations. The election made by the Participant
and consented to by his spouse may be revoked by
the Participant in writing without the consent of
the spouse at any time during the election
period. The number of revocations shall not be
limited. Any new election must comply with the
requirements of this paragraph. A former spouse's
waiver shall not be binding on a new spouse.
(3) The election period to waive the joint and
survivor annuity shall be the 90 day period
ending on the "annuity starting date."
(4) For purposes of this Section, the "annuity
starting date" means the first day of the first
period for which an amount is paid as an annuity,
or, in the case of a benefit not payable in the
form of an annuity, the first day on which all
events have occurred which entitle the
Participant to such benefit.
(5) With regard to the election, the
Administrator shall provide to the Participant no
less than 30 days and no more than 90 days before
the "annuity starting date" a written explanation
of:
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(i) the terms and conditions of the joint
and survivor annuity, and
(ii) the Participant's right to make, and
the effect of, an election to waive the
joint and survivor annuity, and
(iii) the right of the Participant's spouse
to consent to any election to waive the
joint and survivor annuity, and
(iv) the right of the Participant to revoke
such election, and the effect of such
revocation.
(b) In the event a married Participant duly
elects pursuant to paragraph (a)(2) above not to
receive his benefit in the form of a joint and survivor
annuity, or if such Participant is not married, in the
form of a life annuity, the Administrator, pursuant to
the election of the Participant, shall direct the
Trustee to distribute to a Participant or his
Beneficiary any amount to which he is entitled under
the Plan in one lump-sum payment in cash.
(c) The present value of a Participant's joint
and survivor annuity derived from Employer and Employee
contributions may not be paid without his written
consent if the value exceeds, or has ever exceeded,
$3,500 at the time of any prior distribution. Further,
the spouse of a Participant must consent in writing to
any immediate distribution. If the value of the
Participant's benefit derived from Employer and
Employee contributions does not exceed $3,500 and has
never exceeded $3,500 at the time of any prior
distribution, the Administrator may immediately
distribute such benefit without such Participant's
consent. No distribution may be made under the
preceding sentence after the "annuity starting date"
unless the Participant and his spouse consent in
writing to such distribution. Any written consent
required under this paragraph must be obtained not more
than 90 days before commencement of the distribution
and shall be made in a manner consistent with Section
6.5(a)2.
(d) Any distribution to a Participant who has a
benefit which exceeds, or has ever exceeded, $3,500 at
the time of any prior distribution shall require such
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Participant's consent if such distribution commences
prior to the later of his Normal Retirement Age or age
62. With regard to this required consent:
(1) No consent shall be valid unless the
Participant has received a general description of
the material features and an explanation of the
relative values of the optional forms of benefit
available under the Plan that would satisfy the
notice requirements of Code Section 417.
(2) The Participant must be informed of his
right to defer receipt of the distribution. If a
Participant fails to consent, it shall be deemed
an election to defer the commencement of payment
of any benefit. However, any election to defer
the receipt of benefits shall not apply with
respect to distributions which are required under
Section 6.5(e).
(3) Notice of the rights specified under this
paragraph shall be provided no less than 30 days
and no more than 90 days before the "annuity
starting date".
(4) Written consent of the Participant to the
distribution must not be made before the
Participant receives the notice and must not be
made more than 90 days before the "annuity
starting date".
(5) No consent shall be valid if a significant
detriment is imposed under the Plan on any
Participant who does not consent to the
distribution.
(e) Notwithstanding any provision in the Plan to
the contrary, the distribution of a Participant's
benefits, whether under the Plan or through the
purchase of an annuity contract, shall be made in
accordance with the following requirements and shall
otherwise comply with Code Section 401(a)(9) and the
Regulations thereunder (including Regulation
1.401(a)(9)-2), the provisions of which are
incorporated herein by reference:
(1) A Participant's benefits shall be
distributed to him not later than April 1st of
the calendar year following the later of (i) the
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calendar year in which the Participant attains
age 70 1/2 or (ii) the calendar year in which the
Participant retires, provided, however, that this
clause (ii) shall not apply in the case of a
Participant who is a "five (5) percent owner" at
any time during the five (5) Plan Year period
ending in the calendar year in which he attains
age 70 1/2 or, in the case of a Participant who
becomes a "five (5) percent owner" during any
subsequent Plan Year, clause (ii) shall no longer
apply and the required beginning date shall be
the April 1st of the calendar year following the
calendar year in which such subsequent Plan Year
ends. Alternatively, if the distribution is to be
in the form of a joint and survivor annuity or
single life annuity as provided in paragraph
(a)(1) above, then distributions must begin no
later than the applicable April 1st as determined
under the preceding sentence and must be made
over the life of the Participant (or the lives of
the Participant and the Participant's designated
Beneficiary) in accordance with Regulations.
Notwithstanding the foregoing, clause (ii) above
shall not apply to any Participant unless the
Participant had attained age 70 1/2 before
January 1, 1988 and was not a "five (5) percent
owner" at any time during the Plan Year ending
with or within the calendar year in which the
Participant attained age 66 1/2 or any subsequent
Plan Year.
(2) Distributions to a Participant and his
Beneficiaries shall only be made in accordance
with the incidental death benefit requirements of
Code Section 401(a)(9)(G) and the Regulations
thereunder.
(f) All annuity Contracts under this Plan shall
be non-transferable when distributed. Furthermore, the
terms of any annuity Contract purchased and distributed
to a Participant or spouse shall comply with all of the
requirements of the Plan.
(g) If a distribution is made at a time when a
Participant is not fully Vested in his Participant's
Account (employment has not terminated) and the
Participant may increase the Vested percentage in such
account:
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(1) a separate account shall be established for
the Participant's interest in the Plan as of the
time of the distribution; and
(2) at any relevant time, the Participant's
Vested portion of the separate account shall be
equal to an amount ("X") determined by the
formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the
Vested percentage at the relevant time, AB is the
account balance at the relevant time, D is the
amount of distribution, and R is the ratio of the
account balance at the relevant time to the
account balance after distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATh
(a) Unless otherwise elected as provided below,
a Vested Participant who dies before the annuity
starting date and who has a surviving spouse shall have
his death benefit paid to his surviving spouse in the
form of a Pre-Retirement Survivor Annuity. The
Participant's spouse may direct that payment of the
Pre-Retirement Survivor Annuity commence within a
reasonable period after the Participant's death. If the
spouse does not so direct, payment of such benefit will
commence at the time the Participant would have
attained the later of his Normal Retirement Age or age
62. However, the spouse may elect a later commencement
date. Any distribution to the Participant's spouse
shall be subject to the rules specified in Section
6.6(g).
(b) Any election to waive the Pre-Retirement
Survivor Annuity before the Participant's death must be
made by the Participant in writing during the election
period and shall require the spouse's irrevocable
consent in the same manner provided for in Section
6.5(a)(2). Further, the spouse's consent must
acknowledge the specific nonspouse Beneficiary.
Notwithstanding the foregoing, the nonspouse
Beneficiary need not be acknowledged, provided the
consent of the spouse acknowledges that the spouse has
the right to limit consent only to a specific
Beneficiary and that the spouse voluntarily elects to
relinquish such right.
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<PAGE> 88
(c) The election period to waive the
Pre-Retirement Survivor Annuity shall begin on the
first day of the Plan Year in which the Participant
attains age 35 and end on the date of the Participant's
death. An earlier waiver (with spousal consent) may be
made provided a written explanation of the
Pre-Retirement Survivor Annuity is given to the
Participant and such waiver becomes invalid at the
beginning of the Plan Year in which the Participant
turns age 35. In the event a Vested Participant
separates from service prior to the beginning of the
election period, the election period shall begin on the
date of such separation from service.
(d) With regard to the election, the
Administrator shall provide each Participant within the
applicable period, with respect to such Participant
(and consistent with Regulations), a written
explanation of the Pre-Retirement Survivor Annuity
containing comparable information to that required
pursuant to Section 6.5(a)(5). For the purposes of this
paragraph, the term "applicable period" means, with
respect to a Participant, whichever of the following
periods ends last:
(1) The period beginning with the first day of
the Plan Year in which the Participant attains
age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant
attains age 35;
(2) A reasonable period after the individual
becomes a Participant;
(3) A reasonable period ending after the Plan no
longer fully subsidizes the cost of the
Pre-Retirement Survivor Annuity with respect to
the Participant;
(4) A reasonable period ending after Code
Section 401(a)(11) applies to the Participant; or
(5) A reasonable period after separation from
service in the case of a Participant who
separates before attaining age 35. For this
purpose, the Administrator must provide the
explanation beginning one year before the
separation from service and ending one year after
such separation. If such a Participant thereafter
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returns to employment with the Employer, the
applicable period for such Participant shall be
redetermined.
For purposes of applying this Section
6.6(d), a reasonable period ending after the enumerated
events described.in paragraphs (2), (3) and (4) is the
end of the two year period beginning one year prior to
the date the applicable event occurs, and ending one
year after that date.
(e) If the present value of the Pre-Retirement
Survivor Annuity derived from Employer and Employee
contributions does not exceed $3,500 and has never
exceeded $3,500 at the time of any prior distribution,
the Administrator shall direct the immediate
distribution of such amount to the Participant's
spouse. No distribution may be made under the preceding
sentence after the annuity starting date unless the
spouse consents in writing.
(f) In the event the death benefit is not paid
in the form of a Pre-Retirement Survivor Annuity, it
shall be paid to the Participant's Beneficiary in one
lump sum in cash.
(g) Notwithstanding any provision in the Plan to
the contrary, distributions upon the death of a
Participant shall be made in accordance with the
following requirements and shall otherwise comply with
Code Section 401(a)(9) and the Regulations thereunder.
If the death benefit is paid in the form of a
Pre-Retirement Survivor Annuity, then distributions to
the Participant's surviving spouse must commence on or
before the later of: (1) December 31st of the calendar
year immediately following the calendar year in which
the Participant died; or (2) December 31st of the
calendar year in which the Participant would have
attained age 70 1/2. If it is determined pursuant to
Regulations that the distribution of a Participant's
interest has begun and the Participant dies before his
entire interest has been distributed to him, the
remaining portion of such interest shall be distributed
at least as rapidly as under the method of distribution
selected pursuant to Section 6.5 as of his date of
death. If a Participant dies before he has begun to
receive any distributions of his interest under the
Plan or before distributions are deemed to have begun
pursuant to Regulations (and distributions are not to
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be made in the form of a Pre-Retirement Survivor
Annuity), then his death benefit shall be distributed
to his Beneficiaries by December 31st of the calendar
year in which the fifth anniversary of his date of
death occurs.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the
Trustee is to make a distribution or to commence a series of
payments on or as of an Anniversary Date, the distribution may be
made or begun on such date or as soon thereafter as is
practicable. However, unless a Former Participant elects in
writing to defer the receipt of benefits (such election may not
result in a death benefit that is more than incidental), the
payment of benefits shall begin not later than the 60th day after
the close of the Plan Year in which the latest of the following
events occurs: (a) the date on which the Participant attains the
earlier of age 65 or the Normal Retirement Age specified herein;
(b) the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or (c) the date the
Participant terminates his service with the Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor,
then the Administrator may direct that such distribution be paid
to the legal guardian, or if none, to a parent of such
Beneficiary or a responsible adult with whom the Beneficiary
maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if
such is permitted by the laws of the state in which said
Beneficiary resides. Such a payment to the legal guardian,
custodian or parent of a minor Beneficiary shall fully discharge
the Trustee, Employer, and Plan from further liability on account
thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the
distribution payable to a Participant or his Beneficiary
hereunder shall, at the later of the Participant's attainment of
age 62 or his Normal Retirement Age, remain unpaid solely by
reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known
address, and after further diligent effort, to ascertain the
whereabouts of such Participant or his Beneficiary, the amount so
distributable shall be treated as a Forfeiture pursuant to the
Plan. In the event a Participant or Beneficiary is located
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subsequent to his benefit being reallocated, such benefit shall
be restored.
6.10 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the
age of 59 1/2 years, the Administrator, at the election of the
Participant, shall direct the Trustee to distribute all or a
portion of the amount then credited to the accounts maintained on
behalf of the Participant. However, no distribution from the
Participant's Account shall occur prior to 100% vesting. In the
event that the Administrator makes such a distribution, the
Participant shall continue to be eligible to participate in the
Plan on the same basis as any other Employee. Any distribution
made pursuant to this Section shall be made in a manner
consistent with Section 6.5, including, but not limited to, all
notice and consent requirements of Code Sections 417 and
411(a)(11) and the Regulations thereunder.
Notwithstanding the above, pre-retirement distributions
from a Participant's Elective Account shall not be permitted
prior to the Participant attaining age 59 1/2 except as otherwise
permitted under the terms of the Plan.
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the
Participant, shall direct the Trustee to distribute to
any Participant in any one Plan Year up to the lesser
of 100% of his Participant's Elective Account and his
Participant's Account valued as of the last Anniversary
Date or other valuation date or the amount necessary to
satisfy the immediate and heavy financial need of the
Participant. Any distribution made pursuant to this
Section shall be deemed to be made as of the first day
of the Plan Year or, if. later, the valuation date
immediately preceding the date of distribution, and the
Participant's Elective Account and his Participant's
Account shall be reduced accordingly. Withdrawal under
this Section shall be authorized only if the
distribution is on account of:
(1) Expenses for medical care described in Code
Section 213(d) previously incurred by the
Participant, his spouse, or any of his dependents
(as defined in Code Section 152) or necessary for
these persons to obtain medical care;
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(2) The costs directly related to the purchase
of a principal residence for the Participant
(excluding mortgage payments);
(3) Payment of tuition and related educational
fees for the next twelve (12) months of
post-secondary education for the Participant, his
spouse, children, or dependents; or
(4) Payments necessary to prevent the eviction
of the Participant from his principal residence
or foreclosure on the mortgage of the
Participant' s principal residence.
(b) No such distribution shall be made from the
Participant's Account until such Account has become
fully Vested.
(c) No distribution shall be made pursuant to
this Section unless the Administrator, based upon the
Participant's representation and such other facts as
are known to the Administrator, determines that all of
the following conditions are satisfied:
(1) The distribution is not in excess of the
amount of the immediate and heavy financial need
of the Participant. The amount of the immediate
and heavy financial need may include any amounts
necessary to pay any federal, state, or local
income taxes or penalties reasonably anticipated
to result from the distribution;
(2) The Participant has obtained all
distributions, other than hardship distributions,
and all nontaxable (at the time of the loan)
loans currently available under all plans
maintained by the Employer;
(3) The Plan, and all other plans maintained by
the Employer, provide that the Participant's
elective deferrals and voluntary Employee
contributions will be suspended for at least
twelve (12) months after receipt of the hardship
distribution or, the Participant, pursuant to a
legally enforceable agreement, will suspend his
elective deferrals and voluntary Employee
contributions to the Plan and all other plans
maintained by the Employer for at least twelve
(12) months after receipt of the hardship
distribution; and
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(4) The Plan, and all other plans maintained by
the Employer, provide that the Participant may
not make elective deferrals for the Participant's
taxable year immediately following the taxable
year of the hardship distribution in excess of
the applicable limit under Code Section 402(g)
for such next taxable year less the amount of
such Participant's elective deferrals for the
taxable year of the hardship distribution.
(d) Notwithstanding the above, for Plan Years
beginning after December 31, 1988, distributions from
the Participant's Elective Account pursuant to this
Section shall be limited, as of the date of
distribution, to the Participant's Elective Account as
of the end of the last Plan Year ending before July 1,
1989, plus the total Participant's Deferred
Compensation after such date, reduced by the amount of
any previous distributions pursuant to this Section and
Section 6.10.
(e) Any distribution made pursuant to this
Section shall be made in a manner which is consistent
with and satisfies the provisions of Section 6.5,
including, but not limited to, all notice and consent
requirements of Code Sections 417 and 411(a)(11) and
the Regulations thereunder.
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided
to a Participant in this Plan shall be subject to the rights
afforded to any "alternate payee" under a "qualified domestic
relations order." Furthermore, a distribution to an "alternate
payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected
Participant has not separated from service and has not reached
the "earliest retirement age" under the Plan. For the purposes of
this Section, "alternate payee," "qualified domestic relations
order" and "earliest retirement age" shall have the meaning set
forth under Code Section 414(p).
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ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of
responsibilities:
(a) Consistent with the "funding policy and
method" determined by the Employer, to invest, manage,
and control the Plan assets subject, however, to the
direction of an Investment Manager if the Employer
should appoint such manager as to all or a portion of
the assets of the Plan;
(b) At the direction of the Administrator, to
pay benefits required under the Plan to be paid to
Participants, or, in the event of their death, to their
Beneficiaries;
(c) To maintain records of receipts and
disbursements and furnish to the Employer and/or
Administrator for each Plan Year a written annual
report per Section 7.7; and
(d) If there shall be more than one Trustee,
they shall act by a majority of their number, but may
authorize one or more of them to sign papers on their
behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the
Trust Fund to keep the Trust Fund invested without
distinction between principal and income and in such
securities or property, real or personal, wherever
situated, as the Trustee shall deem advisable,
including, but not limited to, stocks, common or
preferred, bonds and other evidences of indebtedness or
ownership, and real estate or any interest therein. The
Trustee shall at all times in making investments of the
Trust Fund consider, among other factors, the short and
long-term financial needs of the Plan on the basis of
information furnished by the Employer. In making such
investments, the Trustee shall not be restricted to
securities or other property of the character expressly
authorized by the applicable law for trust investments;
however, the Trustee shall give due regard to any
limitations imposed by the Code or the Act so that at
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all times the Plan may qualify as a qualified Profit
Sharing Plan and Trust.
(b) The Trustee may employ a bank or trust
company pursuant to the terms of its usual and
customary bank agency agreement, under which the duties
of such bank or trust company shall be of a custodial,
clerical and record-keeping nature.
(c) The Trustee may from time to time with the
consent of the Employer transfer to a common,
collective, or pooled trust fund maintained by any
corporate Trustee hereunder, all or such part of the
Trust Fund as the Trustee may deem advisable, and such
part or all of the Trust Fund so transferred shall be
subject to all the terms and provisions of the common,
collective, or pooled trust fund which contemplate the
commingling for investment purposes of such trust
assets with trust assets of other trusts. The Trustee
may, from time to time with the consent of the
Employer, withdraw from such common, collective, or
pooled trust fund all or such part of the Trust Fund as
the Trustee may deem advisable.
(d) To the extent permitted under applicable
laws, to invest in deposits, long and short term debt
instruments, stocks, and other securities, including
those of the Trustee, The Charles Schwab Corporation
(the "Public Company"), Charles Schwab and Company,
Inc. (the "Broker/Dealer"), their affiliates and
subsidiaries.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities
under common law, statutory authority, including the Act, and
other provisions of the Plan, shall have the following powers and
authorities, to be exercised in the Trustee's sole discretion:
(a) To purchase, or subscribe for, any
securities or other property and to retain the same. In
conjunction with the purchase of securities, margin
accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant
options to purchase, or otherwise dispose of any
securities or other property held by the Trustee, by
private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the
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application of the purchase money or to inquire into
the validity, expediency, or propriety of any such sale
or other disposition, with or without advertisement;
(c) To deliver to the Administrator, Employer,
or the persons identified by the Employer, proxies and
powers of attorney and related informational material,
for any shares or other property held in the Trust. The
Employer shall have responsibility for voting such
shares, by proxy, or in person, except to the extent
such responsibility is delegated to another person,
under the terms of the Plan or Trust Agreement or under
an agreement between the named fiduciary of the Plan
and an investment manager, in which case such persons
shall have such responsibility. The Trustee may use
agents to effect such delivery to the Employer or the
person or persons identified by the Employer. In no
event shall the Trustee be responsible for the voting
of shares of securities held in the Trust or for
ascertaining or monitoring whether, or how, proxies are
voted or whether the proper number of proxies is
received;
(d) To cause any securities or other property to
be registered in the Trustee's own name or in the name
of one or more of the Trustee's nominees, and to hold
any investments in bearer form, but the books and
records of the Trustee shall at all times show that all
such investments are part of the Trust Fund;
(e) To borrow or raise money for the purposes of
the Plan in such amount, and upon such terms and
conditions, as the Trustee shall deem advisable; and
for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by
pledging all, or any part, of the Trust Fund; and no
person lending money to the Trustee shall be bound to
see to the application of the money lent or to inquire
into the validity, expediency, or propriety of any
borrowing;
(f) To keep such portion of the Trust Fund in
cash or cash balances as the Trustee may, from time to
time, deem to be in the best interests of the Plan,
without liability for interest thereon;
(g) To accept and retain for such time as the
Trustee may deem advisable any securities or other
property received or acquired as Trustee hereunder,
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whether or not such securities or other property would
normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver
any and all documents of transfer and conveyance and
any and all other instruments that may be necessary or
appropriate to carry out the powers herein granted;
(i) To settle, compromise, or submit to
arbitration any claims, debts, or damages due or owing
to or from the Plan, to commence or defend suits or
legal or administrative proceedings, and to represent
the Plan in all suits and legal and administrative
proceedings;
(j) To appoint agents as necessary or desirable,
including legal counsel who may be counsel for the
Employer.
(k) To apply for and procure from responsible
insurance companies, to be selected by the
Administrator, as an investment of the Trust Fund such
annuity, or other Contracts (on the life of any
Participant) as the Administrator shall deem proper; to
exercise, at any time or from time to time, whatever
rights and privileges may be granted under such
annuity, or other Contracts; to collect, receive, and
settle for the proceeds of all such annuity or other
Contracts as and when entitled to do so under the
provisions thereof;
(l) To invest funds of the Trust inn time
deposits or savings accounts bearing a reasonable rate
of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms
of United States government obligations;
(n) To invest in shares of investment companies
registered under the Investment Company Act of 1940;
(o) To sell, purchase and acquire put or call
options if the options are traded on and purchased
through a national securities exchange registered under
the Securities Exchange Act of 1934, as amended, or, if
the options are not traded on a national securities
exchange, are guaranteed by a member firm of the New
York Stock Exchange;
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(p) To deposit monies in federally insured
savings accounts or certificates of deposit in banks or
savings and loan associations;
(q) To pool all or any of the Trust Fund, from
time to time, with assets belonging to any other
qualified employee pension benefit trust created by the
Employer or an affiliated company of the Employer, and
to commingle such assets and make joint or common
investments and carry joint accounts on behalf of this
Plan and such other trust or trusts, allocating
undivided shares or interests in such investments or
accounts or any pooled assets of the two or more trusts
in accordance with their respective interests;
(r) To do all such acts and exercise all such
rights and privileges, although not specifically
mentioned herein, as the Trustee may deem necessary to
carry out the purposes of the Plan.
(s) Directed Investment Account. The powers
granted to the Trustee shall be exercised in the sole
fiduciary discretion of the Trustee. However, if
Participants are so empowered by the Administrator,
each Participant may direct the Trustee to separate and
keep separate all or a portion of his account; and
further each Participant is authorized and empowered,
in his sole and absolute discretion, to give directions
to the Trustee pursuant to the procedure established by
the Administrator and in such form as the Trustee may
require concerning the investment of the Participant's
Directed Investment Account. The Trustee shall comply
as promptly as practicable with directions given by the
Participant hereunder. The Trustee may refuse to comply
with any direction from the Participant in the event
the Trustee, in its sole and absolute discretion, deems
such directions improper by virtue of applicable law.
The Trustee shall not be responsible or liable for any
loss or expense which may result from the Trustee's
refusal or failure to comply with any directions from
the Participant. Any costs and expenses related to
compliance with the Participant's directions shall be
borne by the Participant's Directed Investment Account.
(t) To deposit securities in a security
depository and permit the securities so deposited to be
held in the name of the depository's nominee, and to
deposit securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof,
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including securities evidenced by book entry rather
than by certificate, with the U.S. Department of the
Treasury, a Federal Reserve Bank or other appropriate
custodial entity, in the same account as the Trustee's
own property, provided the Trustee's records and
accounts show that such securities are assets of the
Trust Fund.
(u) To hold securities issued by a foreign
government or business entity at a foreign office of
the Trustee or any of its affiliates, or to deposit
such securities with a foreign depository regulated by
a government agency or regulatory authority in the
foreign jurisdiction, and to permit the securities so
deposited to be held in the nominee name of the
depository bank, provided that the Trustee's records
and accounts show that such securities belong to the
Trust Fund.
(v) Any dispute under this Agreement shall be
resolved by submission of the issue to a member of the
American Arbitration Association who is chosen by the
Employer and the Trustee. If the Employer and the
Trustee cannot agree on such a choice, each shall
nominate a member of the American Arbitration
Association, and the two nominees will then select an
arbitrator. Expenses of the arbitration shall be paid
as decided by the arbitrator.
(w) The Trustee is authorized to tape record
conversations between the Trustee and persons acting on
behalf of the Plan or a participant in the Plan to
verify data on transactions.
(x) As stated in Article Number 4.13 of the Plan
Document, each participant and/or beneficiary may have
investment power over the account maintained for him or
her, and may direct the investment and reinvestment of
assets of the account among the options authorized by
the Administrator. Such direction shall be furnished to
the Trustee in writing or some other agreed upon format
established under procedures agreed to by the Trustee
and Administrator. To the extent provided under ERISA
section 404(c), the Trustee shall not be liable for any
loss, or by the reason of any breach, which results
from such participant's or beneficiary's exercise of
control. If a participant who has investment authority
under the terms of the Plan fails to provide such
directions, the Administrator shall direct the
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investment of the participant's account. The
Administrator shall maintain records showing the
interest of each participant and/or beneficiary in the
Trust Fund. The Trustee shall have no duty or
responsibility to review or make recommendations
regarding investments made at the direction of the
Administrator or participant and shall be required to
act only upon receipt of properly authorized
directions. A participant or beneficiary shall not have
authority to direct the investment of assets in his or
her account in "collectibles" within the meaning of
Code section 408(m)(2).
7.4 LOANS TO PARTICIPANTS
(a) The Trustee may, in the Trustee's
discretion, make loans to Participants and
Beneficiaries under the following circumstances:
(1) loans shall be made available to all Participants
and Beneficiaries on a reasonably equivalent basis;
(2) loans shall not be made available to Highly
Compensated Employees in an amount greater than the
amount made available to other Participants and
Beneficiaries; (3) loans shall bear a reasonable rate
of interest; (4) loans shall be adequately secured; and
(5) shall provide for repayment over a reasonable
period of time.
(b) Loans made pursuant to this Section (when
added to the outstanding balance of all other loans
made by the Plan to the Participant) shall be limited
to the lesser of:
(1) $50,000 reduced by the excess (if any) of
the highest outstanding balance of loans from the
Plan to the Participant during the one year
period ending on the day before the date on which
such loan is made, over the outstanding balance
of loans from the Plan to the Participant on the
date on which such loan was made, or
(2) one-half (1/2) of the present value of the
non-forfeitable accrued benefit of the
Participant under the Plan.
For purposes of this limit, all plans of the
Employer shall be considered one plan. Additionally,
with respect to any loan made prior to January 1, 1987,
the $50,000 limit specified in (1) above shall be
unreduced.
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(c) Loans shall provide for level amortization
with payments to be made not less frequently than
quarterly over a period not to exceed five (5) years.
However, loans used to acquire any dwelling unit which,
within a reasonable time, is to be used (determined at
the time the loan is made) as a principal residence of
the Participant shall provide for periodic repayment
over a reasonable period of time that may exceed five
(5) years. Notwithstanding the foregoing, loans made
prior to January 1, 1987 which are used to acquire,
construct, reconstruct or substantially rehabilitate
any dwelling unit which, within a reasonable period of
time is to be used (determined at the time the loan is
made) as a principal residence of the Participant or a
member of his family (within the meaning of Code
Section 267(c)(4)) may provide for periodic repayment
over a reasonable period of time that may exceed five
(5) years. Additionally, loans made prior to January 1,
1987, may provide for periodic payments which are made
less frequently than quarterly and which do not
necessarily result in level amortization.
(d) Any loan made pursuant to this Section after
August 18, 1985 where the Vested interest of the
Participant is used to secure such loan shall require
the written consent of the Participant's spouse in a
manner consistent with Section 6.5(a). Such written
consent must be obtained within the 90-day period prior
to the date the loan is made. However, no spousal
consent shall be required under this paragraph if the
total accrued benefit subject to the security is not in
excess of $3,500.
(e) Any loans granted or renewed on or after the
last day of the first Plan Year beginning after
December 31, 1988 shall be made pursuant to a
Participant loan program. Such loan program shall be
established in writing and must include, but need not
be limited to, the following:
(1) the identity of the person or positions
authorized to administer the Participant loan
program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or
denied;
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(4) limitations, if any, on the types and
amounts of loans offered;
(5) the procedure under the program for
determining a reasonable rate of interest;
(6) the types of collateral which may secure a
Participant loan; and
(7) the events constituting default and the
steps that will be taken to preserve Plan assets.
Such Participant loan program shall be
contained in a separate written document which, when
properly executed, is hereby incorporated by reference
and made a part of the Plan. Furthermore, such
Participant loan program may be modified or amended in
writing from time to time without the necessity of
amending this Section.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee
shall, from time to time, in accordance with the terms of the
Plan, make payments out of the Trust Fund. The Trustee shall not
be responsible in any way for the application of such payments.
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation
as shall from time to time be agreed upon in writing by the
Employer and the Trustee. An individual serving as Trustee who
already receives full-time pay from the Employer shall not
receive compensation from the Plan. In addition, the Trustee
shall be reimbursed for any reasonable expenses, including
reasonable counsel fees incurred by it as Trustee. Such
compensation and expenses shall be paid from the Trust Fund
unless paid or advanced by the Employer. All taxes of any kind
and all kinds whatsoever that may be levied or assessed under
existing or future laws upon, or in respect of, the Trust Fund or
the income thereof, shall be paid from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of
the Anniversary Date or receipt of the Employer's contribution
for each Plan Year, the Trustee shall furnish to the Employer and
Administrator a written statement of account with respect to the
Plan Year for which such contribution was made setting forth:
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(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust
Fund upon sales or other disposition of the assets;
(c) the increase, or decrease, in the value of
the Trust Fund;
(d) all payments and distributions made from the
Trust Fund; and
(e) such further information as the Trustee
and/or Administrator deems appropriate. The Employer,
forthwith upon its receipt of each such statement of
account, shall acknowledge receipt thereof in writing
and advise the Trustee and/or Administrator of its
approval or disapproval thereof. Failure by the
Employer to disapprove any such statement of account
within thirty (30) days after its receipt thereof shall
be deemed an approval thereof. The approval by the
Employer of any statement of account shall be binding
as to all matters embraced therein as between the
Employer and the Trustee to the same extent as if the
account of the Trustee had been settled by judgment or
decree in an action for a judicial settlement of its
account in a court of competent jurisdiction in which
the Trustee, the Employer and all persons having or
claiming an interest in the Plan were parties;
provided, however, that nothing herein contained shall
deprive the Trustee of its right to have its accounts
judicially settled if the Trustee so desires.
7.8 AUDIT
(a) If an audit of the Plan's records shall be
required by the Act and the regulations thereunder for
any Plan Year, the Administrator shall direct the
Trustee to engage on behalf of all Participants an
independent qualified public accountant for that
purpose. Such accountant shall, after an audit of the
books and records of the Plan in accordance with
generally accepted auditing standards, within a
reasonable period after the close of the Plan Year,
furnish to the Administrator and the Trustee a report
of his audit setting forth his opinion as to whether
any statements, schedules or lists that are required by
Act-Section 103 or the Secretary of Labor to be filed
with the Plan's annual report, are presented fairly in
conformity with generally accepted accounting
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principles applied consistently. All auditing and
accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust
Fund.
(b) If some or all of the information necessary
to enable the Administrator to comply with Act Section
103 is maintained by a bank, insurance company, or
similar institution, regulated and supervised and
subject to periodic examination by a state or federal
agency, it shall transmit and certify the accuracy of
that information to the Administrator as provided in
Act Section 103(b) within one hundred twenty (120) days
after the end of the Plan Year or by such other date as
may be prescribed under regulations of the Secretary of
Labor.
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by
delivering to the Employer, at least thirty (30) days
before its effective date, a written notice of his
resignation.
(b) The Employer may remove the Trustee by
mailing by registered or certified mail, addressed to
such Trustee at his last known address, at least thirty
(30) days before its effective date, a written notice
of his removal.
(c) Upon the death, resignation, incapacity, or
removal of any Trustee, a successor may be appointed by
the Employer; and such successor, upon accepting such
appointment in writing and delivering same to the
Employer, shall, without further act, become vested
with all the estate, rights, powers, discretions, and
duties of his predecessor with like respect as if he
were originally named as a Trustee herein. Until such a
successor is appointed, the remaining Trustee or
Trustees shall have full authority to act under the
terms of the Plan.
(d) The Employer may designate one or more
successors prior to the death, resignation, incapacity,
or removal of a Trustee. In the event a successor is so
designated by the Employer and accepts such
designation, the successor shall, without further act,
become vested with all the estate, rights, powers,
discretions, and duties of his predecessor with the
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like effect as if he were originally named as Trustee
herein immediately upon the death, resignation,
incapacity, or removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to
serve as such, he shall furnish to the Employer and
Administrator a written statement of account with
respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either
(i) included as part of the annual statement of account
for the Plan Year required under Section 7.7 or
(ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer
no later than the due date of the annual statement of
account for the Plan Year. The procedures set forth in
Section 7.7 for the approval by the Employer of annual
statements of account shall apply to any special
statement of account rendered hereunder and approval by
the Employer of any such special statement in the
manner provided in Section 7.7 shall have the same
effect upon the statement as the Employer's approval of
an annual statement of account. No successor to the
Trustee shall have any duty or responsibility to
investigate the acts or transactions of any predecessor
who has rendered all statements of account required by
Section 7.7 and this subparagraph.
7.10 TRANSFER OF INTEREST.
Notwithstanding any other provision contained in this
Plan, the Trustee at the direction of the Administrator shall
transfer the Vested interest, if any, of such Participant in his
account to another trust forming part of a pension, profit
sharing or stock bonus plan maintained by such Participant's new
employer and represented by said employer in writing as meeting
the requirements of Code Section 401(a), provided that the trust
to which such transfers are made permits the transfer to be made.
7.11 DIRECT ROLLOVER
(a) This Section applies to distributions made
on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would
otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and in
the manner prescribed by the Plan Administrator, to
have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified
by the distributee in a direct rollover.
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(1) An eligible rollover distribution is any
distribution of all or any portion of the balance
to the credit of the distributee, except that an
eligible rollover distribution does not include:
any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or
life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the
distributee and the distributee's designated
beneficiary, or for a specified period of ten
years or more; any distribution to the extent
such distribution is required under section
401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross
income (determined without regard to the
exclusion for net unrealized appreciation with
respect to employer securities).
(2) An eligible retirement plan is an individual
retirement account described in section 408(a) of
the Code, an individual retirement annuity
described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the
Code, or a qualified trust described in section
401(a) of the Code, that accepts the
distributee's eligible rollover distribution.
However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible
retirement plan is an individual retirement
account or individual retirement annuity.
(3) A distributee includes an Employee or former
Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic
relations order, as defined in section 414(p) of
the Code, are distributees with regard to the
interest of the spouse or former spouse.
(4) A direct rollover is a payment by the plan
to the eligible retirement plan specified by the
distributee.
7.12 AFFILIATED COMPANY
(a) The Trustee is authorized to contact or make other
arrangements with The Charles Schwab Corporation (the
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"Public Company"), Charles Schwab and Co., Inc. (the
"Broker/Dealer"), their affiliates and subsidiaries,
successors and assigns, and any other organizations
affiliated with or subsidiaries of the Trustee or
related entities, for the provision of services to the
Trust or Plan, except where such arrangements are
prohibited by law or regulation.
(b) The Trustee is authorized to place securities
orders, settle securities trades, hold securities in
custody, and other related activities on behalf of the
Trust through or by the Broker/Dealer whenever
possible, unless the Authorized Person specifically
instructs the use of another broker/dealer. Trades (and
related activities) conducted through the Broker/Dealer
shall be subject to fees and commissions established by
the Broker/Dealer, which may be paid from the Trust or
netted from the proceeds of trades.
Trades shall not be executed through the
Broker/Dealer unless the Administrator and the
Authorized Person have received disclosure concerning
the relationship of the Broker/Dealer to the Trustee,
and fees and commissions which may be paid to the
Public Company, Broker/ Dealer, the Trustee and/or
affiliates or subsidiaries as a result of using the
Broker/Dealer's execution of other services.
The Trustee is authorized to disclose such
information as is necessary to the operation and
administration of the Trust to the Public Company or
any of its affiliates, and to such other persons or
organizations that the Trustee determines have a
legitimate business purpose for obtaining such
information.
(c) At the direction of the Administrator (or other
Authorized Person), the Trustee may purchase shares of
regulated investment companies (or other investment
vehicles) advised by the Holding Company, Broker/Dealer
or the Trustee or any affiliate of any of them ("Schwab
Funds") except to the extent that such investment is
prohibited by law or regulation.
Uninvested cash of the Trust may be invested
in Schwab Funds designated by the Administrator (of
other Authorized Person) for that purpose, unless the
Administrator specifically instructs the use of another
fund or account, except to the extent prohibited by law
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or regulation.
Schwab Fund shares may not be purchased or
held by the Trust unless the Administrator has received
disclosure concerning the Public Company's,
Broker/Dealer's, the Trustee's and/or their affiliate's
or subsidiary's relationship to the Funds, and any fees
which may be paid to the Public Company, Broker/Dealer,
Trustee and/or their affiliates or subsidiaries.
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any
time to amend the Plan, subject to the limitations of
this Section. However, any amendment which affects the
rights, duties or responsibilities of the Trustee and
Administrator may only be made with the Trustee's and
Administrator's written consent. Any such amendment
shall become effective as provided therein upon its
execution. The Trustee shall not be required to execute
any such amendment unless the Trust provisions
contained herein are a part of the Plan and the
amendment affects the duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective
if it authorizes or permits any part of the Trust Fund
(other than such part as is required to pay taxes and
administration expenses) to be used for or diverted to
any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or
causes any reduction in the amount credited to the
account of any Participant; or causes or permits any
portion of the Trust Fund to revert to or become
property of the Employer.
(c) Except as permitted by Regulations, no Plan
amendment or transaction having the effect of a Plan
amendment (such as a merger, plan transfer or similar
transaction) shall be effective to the extent it
eliminates or reduces any "Section 411(d)(6) protected
benefit" or adds or modifies conditions relating to
"Section 411(d)(6) protected benefits" the result of
which is a further restriction on such benefit unless
such protected benefits are preserved with respect to
benefits accrued as of the later of the adoption date
or effective date of the amendment. "Section 411(d)(6)
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protected benefits" are benefits described in Code
Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of
benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any
time to terminate the Plan by delivering to the Trustee
and Administrator written notice of such termination.
Upon any full or partial termination, all amounts
credited to the affected Participants' Combined
Accounts shall become 100% Vested as provided in
Section 6.4 and shall not thereafter be subject to
forfeiture, and all unallocated amounts shall be
allocated to the accounts of all Participants in
accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the
Employer shall direct the distribution of the assets of
the Trust Fund to Participants in a manner which is
consistent with and satisfies the provisions of Section
6.5. Distributions to a Participant shall be made in
cash or through the purchase of irrevocable
nontransferable deferred commitments from an insurer.
Except as permitted by Regulations, the termination of
the Plan shall not result in the reduction of "Section
411(d)(6) protected benefits" in accordance with
Section 8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with,
or its assets and/or liabilities may be transferred to any other
plan and trust only if the benefits which would be received by a
Participant of this Plan, in the event of a termination of the
plan immediately after such transfer, merger or consolidation,
are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the
transfer, merger or consolidation, and such transfer, merger or
consolidation does not otherwise result in the elimination or
reduction of any "Section 411(d)(6) protected benefits" in
accordance with Section 8.1(c).
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ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract
between the Employer and any Participant or to be a consideration
or an inducement for the employment of any Participant or
Employee. Nothing contained in this Plan shall be deemed to give
any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the
Employer to discharge any Participant or Employee at any time
regardless of the effect which such discharge shall have upon him
as a Participant of this Plan.
9.2 ALIENATION
(a) Subject to the exceptions provided below, no
benefit which shall be payable out of the Trust Fund to
any person (including a Participant or his Beneficiary)
shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be void; and no such benefit
shall in any manner be liable for, or subject to, the
debts, contracts, liabilities, engagements, or torts of
any such person, nor shall it be subject to attachment
or legal process for or against such person, and the
same shall not be recognized by the Trustee, except to
such extent as may be required by law.
(b) This provision shall not apple to the extent
a Participant or Beneficiary is indebted to the Plan,
as a result of a loan from the Plan. At the time a
distribution is to be made to or for a Participant's or
Beneficiary's benefit, such proportion of the amount
distributed as shall equal such loan indebtedness shall
be paid by the Trustee to the Trustee or the
Administrator, at the direction of the Administrator,
to apply against or discharge such loan indebtedness.
Prior to making a payment, however, the Participant or
Beneficiary must be given written notice by the
Administrator that such loan indebtedness is to be so
paid in whole or part from his Participant's Combined
Account. If the Participant or Beneficiary does not
agree that the loan indebtedness is a valid claim
against his Vested Participant's Combined Account, he
shall be entitled to a review of the validity of the
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claim in accordance with procedures provided in
Sections 2.12 and 2.13.
(c) This provision shall not apply to a
"qualified domestic relations order" defined in Code
Section 414(p), and those other domestic relations
orders permitted to be so treated by the Administrator
under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written
procedure to determine the qualified status of domestic
relations orders and to administer distributions under
such qualified orders. Further, to the extent provided
under a "qualified-domestic relations order", a former
spouse of a Participant shall be treated as the spouse
or surviving spouse for all purposes under the Plan.
9.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced
according to the Act and the laws of the State of Ohio, other
than its laws respecting choice of law, to the extent not
preempted by the Act.
9.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine,
feminine or neuter gender, they shall be construed as though they
were also used in another gender in all cases where they would so
apply, and whenever any words are used herein in the singular or
plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought
regarding the Trust and/or Plan established hereunder to which
the Trustee or the Administrator may be a party, and such claim,
suit, or proceeding is resolved in favor of the Trustee or
Administrator, they shall be entitled to be reimbursed from the
Trust Fund for any and all costs, attorney's fees, and other
expenses pertaining thereto incurred by them for which they shall
have become liable.
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9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise
specifically permitted by law, it shall be impossible
by operation of the Plan or of the Trust, by
termination of either, by power of revocation or
amendment, by the happening of any contingency, by
collateral arrangement or by any other means, for any
part of the corpus or income of any trust fund
maintained pursuant to the Plan or any funds
contributed thereto to be used for, or diverted to,
purposes other than the exclusive benefit of
Participants, Retired Participants, or their
Beneficiaries.
(b) In the event the Employer shall make an
excessive contribution under a mistake of fact pursuant
to Act Section 403(c)(2)(A), the Employer may demand
repayment of such excessive contribution at any time
within one (1) year following the time of payment and
the Trustees shall return such amount to the Employer
within the one (1) year period. Earnings of the Plan
attributable to the excess contributions may not be
returned to the Employer but any losses attributable
thereto must reduce the amount so returned.
9.7 BONDING
Every Fiduciary, except a bank or an insurance company,
unless exempted by the Act and regulations thereunder, shall be
bonded in an amount not less than 10% of the amount of the funds
such Fiduciary handles; provided, however, that the minimum bond
shall be $1,000 and the maximum bond, $500,000. The amount of
funds handled shall be determined at the beginning of each Plan
Year by the amount of funds handled by such person, group, or
class to be covered and their predecessors, if any, during the
preceding Plan Year, or if there is no preceding Plan Year, then
by the amount of the funds to be handled during the then current
year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary
alone or in connivance with others. The surety shall be a
corporate surety company (as such term is used in Act Section
412(a)(2)), and the bond shall be in a form approved by the
Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may,
at the election of the Administrator, be paid from the Trust Fund
or by the Employer.
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9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their
successors, shall be responsible for the validity of any Contract
issued hereunder or for the failure on the part of the insurer to
make payments provided by any such Contract, or for the action of
any person which may delay payment or render a Contract null and
void or unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall
not have any responsibility for the validity of this Plan or for
the tax or legal aspects of this Plan. The insurer shall be
protected and held harmless in acting in accordance with any
written direction of the Trustee, and shall have no duty to see
to the application of any funds paid to the Trustee, nor be
required to question any actions directed by the Trustee.
Regardless of any provision of this Plan, the insurer shall not
be required to take or permit any action or allow any benefit or
privilege contrary to the terms of any Contract which it issues
hereunder, or the rules of the insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal
representative, Beneficiary, or to any guardian or committee
appointed for such Participant or Beneficiary in accordance with
the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and
the Employer, either of whom may require such Participant, legal
representative, Beneficiary, guardian or committee, as a
condition precedent to such payment, to execute a receipt and
release thereof in such form as shall be determined by the
Trustee or Employer.
9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is
permitted or required to do or perform any act or matter or
thing, it shall be done and performed by a person duly authorized
by its legally constituted authority.
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9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the
Employer, (2) the Administrator and (3) the Trustee. The named
Fiduciaries shall have only those specific powers, duties,
responsibilities, and obligations as are specifically given them
under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under
Section 4.1; and shall have the sole authority to appoint and
remove the Trustee and the Administrator; to formulate the Plan's
"funding policy and method"; and to amend or terminate, in whole
or in part, the Plan. The Administrator shall have the sole
responsibility for the administration of the Plan, which
responsibility is specifically described in the Plan. The Trustee
shall have the sole responsibility of management of the assets
held under the Trust, except those assets, the management of
which has been assigned to an Investment Manager, who shall be
solely responsible for the management of the assets assigned to
it, all as specifically provided in the Plan. Each named
Fiduciary warrants that any directions given, information
furnished, or action taken by it shall be in accordance with the
provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named
Fiduciary may rely upon any such direction, information or action
of another named Fiduciary as being proper under the Plan, and is
not required under the. Plan to inquire into the propriety of any
such direction, information or action. It is intended under the
Plan that each named Fiduciary shall be responsible for the
proper exercise of its own powers, duties, responsibilities and
obligations under the Plan. No named Fiduciary shall guarantee
the Trust Fund in any manner against investment loss or
depreciation in asset value. Any person or group may serve in
more than one Fiduciary capacity. In the furtherance of their
responsibilities hereunder, the "named Fiduciaries" shall be
empowered to interpret the Plan and Trust and to resolve
ambiguities, inconsistencies and omissions, which findings shall
be binding, final and conclusive.
9.13 HEADINGS
The headings and subheadings of this Plan have been
inserted for convenience of reference and are to be ignored in
any construction of the provisions hereof.
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9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the
contrary, contributions to this Plan are conditioned
upon the initial qualification of the Plan under Code
Section 401. If the Plan receives an adverse
determination with respect to its initial
qualification, then the Plan may return such
contributions to the Employer within one year after
such determination, provided the application for the
determination is made by the time prescribed by law for
filing the Employer's return for the taxable year in
which the Plan was adopted, or such later date as the
Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the
contrary, except Sections 3.6, 3.7, and 4.1(e), any
contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution
by the Employer under the Code and, to the extent any
such deduction is disallowed, the Employer may, within
one (1) year following the disallowance of the
deduction, demand repayment of such disallowed
contribution and the Trustee shall return such
contribution within one (1) year following the
disallowance. Earnings of the Plan attributable to the
excess contribution may not be returned to the
Employer, but any losses attributable thereto must
reduce the amount so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and
applied in a uniform, nondiscriminatory manner. In the event of
any conflict between the terms of this Plan and any Contract
purchased hereunder, the Plan provisions shall control.
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with
the consent of the Employer and Trustee, any other corporation or
entity, whether an affiliate or subsidiary or not, may adopt this
Plan and all of the provisions hereof, and participate herein and
be known as a Participating Employer, by a properly executed
document evidencing said intent and will of such Participating
Employer.
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<PAGE> 116
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be
required to use the same Trustee as provided in this
Plan.
(b) The Trustee may, but shall not be required
to, commingle, hold and invest as one Trust Fund all
contributions made by Participating Employers, as well
as all increments thereof. However, the assets of the
Plan shall, on an ongoing basis, be available to pay
benefits to all Participants and Beneficiaries under
the Plan without regard to the Employer or
Participating Employer who contributed such assets.
(c) The transfer of any Participant from or to
an Employer participating in this Plan, whether he be
an Employee of the Employer or a Participating
Employer, shall not affect such Participant's rights
under the Plan, and all amounts credited to such
Participant's Combined Account as well as his
accumulated service time with the transferor or
predecessor, and his length of participation in the
Plan, shall continue to his credit.
(d) All rights and values forfeited by
termination of employment shall inure only to the
benefit of the Participants of the Employer or
Participating Employer by which the forfeiting
Participant was employed, except if the Forfeiture is
for an Employee whose Employer is an Affiliated
Employer, then said Forfeiture shall inure to the
benefit of the Participants of those Employers who are
Affiliated Employers. Should an Employee of one
("First") Employer be transferred to an associated
("Second") Employer which is an Affiliated Employer,
such transfer shall not cause his account balance
(generated while an Employee of "First" Employer) in
any manner, or by any amount to be forfeited. Such
Employee's Participant Combined Account balance for all
purposes of the Plan, including length of service,
shall be considered as though he had always been
employed by the "Second" Employer and as such had
received contributions, forfeitures, earnings or
losses, and appreciation or depreciation in value of
assets totaling the amount so transferred.
(e) Any expenses of the Trust which are to be
paid by the Employer or borne by the Trust Fund shall
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be paid by each Participating Employer in the same
proportion that the total amount standing to the credit
of all Participants employed by such Employer bears to
the total standing to the credit of all Participants.
10.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a
party to this Plan; provided, however, that with respect to all
of its relations with the Trustee and Administrator for the
purpose of this Plan, each Participating Employer shall be deemed
to have designated irrevocably the Employer as its agent. Unless
the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer
as related to its adoption of the Plan.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred
between Participating Employers, and in the event of any such
transfer, the Employee involved shall carry with him his
accumulated service and eligibility. No such transfer shall
effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall
thereupon become obligated hereunder with respect to such
Employee in the same manner as was the Participating Employer
from whom the Employee was transferred.
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
Any contribution subject to allocation during each Plan
Year shall be allocated only among those Participants of the
Employer or Participating Employer making the contribution,
except if the contribution is made by an Affiliated Employer, in
which event such contribution shall be allocated among all
Participants of all Participating Employers who are Affiliated
Employers in accordance with the provisions of this Plan. On the
basis of the information furnished by the Administrator, the
Trustee shall keep separate books and records concerning the
affairs of each Participating Employer hereunder and as to the
accounts and credits of the Employees of each Participating
Employer. The Trustee may, but need not, register Contracts so as
to evidence that a particular Participating Employer is the
interested Employer hereunder, but in the event of an Employee
transfer from one Participating Employer to another, the
employing Employer shall immediately notify the Trustee thereof.
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10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when
there shall be a Participating Employer hereunder shall only be
by the written action of each and every Participating Employer
and with the consent of the Trustee where such consent is
necessary in accordance with the terms of this Plan.
10.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to
discontinue or revoke its participation in the Plan. At the time
of any such discontinuance or revocation, satisfactory evidence
thereof and of any applicable conditions imposed shall be
delivered to the Trustee. The Trustee shall thereafter transfer,
deliver and assign Contracts and other Trust Fund assets
allocable to the Participants of such Participating Employer to
such new Trustee as shall have been designated by such
Participating Employer, in the event that it has established a
separate pension plan for its Employees provided, however, that
no such transfer shall be made if the result is the elimination
or reduction of any "Section 411(d)(6) protected benefits" in
accordance with Section 8.1(c). If no successor is designated,
the Trustee shall retain such assets for the Employees of said
Participating Employer pursuant to the provisions of Article VII
hereof. In no such event shall any part of the corpus or income
of the Trust as it relates to such Participating Employer be used
for or diverted to purposes other than for the exclusive benefit
of the Employees of such Participating Employer.
10.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and
all necessary rules or regulations, binding upon all
Participating Employers and all Participants, to effectuate the
purpose of this Article.
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IN WITNESS WHEREOF, this Plan has been executed the day
and year first above written.
Signed, sealed, and delivered
in the presence of:
Telxon Corp.
____________________________ By_________________________
EMPLOYER
____________________________
WITNESSES AS TO EMPLOYER
Charles Schwab Trust Company
____________________________ By_________________________
TRUSTEE
____________________________
WITNESSES AS TO TRUSTEE
ATTEST____________________
113
<PAGE> 1
Exhibit 10.1.1.a
AMENDMENT NUMBER ONE
TO TELXON'S RETIREMENT AND UNIFORM
MATCHING PROFIT SHARING PLAN
Effective date: January 1, 1994
Section 7.3, OTHER POWERS OF THE TRUSTEE of the Plan and Trust Document, has
been amended as follows:
(c) To deliver to the Administrator, Employer, or the person or persons
identified by the Employer, proxies and powers of attorney and related
informational material, for any shares or other property held in the Trust. The
Employer shall have responsibility for voting such shares, by proxy or in
person, except to the extent such responsibility is delegated to another
person, under the terms of the Plan or Trust Agreement or under an agreement
between the named fiduciary of the Plan and an investment manager, in which
case such persons shall have such responsibility. The Trustee may use agents to
effect such delivery to the Employer or the person or persons identified by the
Employer. In no event shall the Trustee be responsible for the voting of shares
of securities held in the Trust or for ascertaining or monitoring whether, or
how, proxies are voted or whether the proper number of proxies is received;
(j) To appoint agents as necessary or desirable, including legal
counsel who may be counsel for the Employer.
Section 7.3 of the Plan and Trust Document has been amended to add:
(s) To deposit securities in a security depository and permit the
securities so deposited to be held in the name of the depository's nominee, and
to deposit securities issued or guaranteed by the U.S. government or any agency
or instrumentality thereof, including securities evidenced by book entry rather
than by certificate, with the U.S. Department of the Treasury, a Federal
Reserve Bank or other appropriate custodial entity, in the same account as the
Trustee's own property, provided the Trustee's records and accounts show that
such securities are assets of the Trust Fund.
(t) To hold securities issued by a foreign government or business
entity at a foreign office of the Trustee or any of its affiliates, or to
deposit such securities with a foreign depository or bank regulated by a
govenment agency or regulatory authority in the foreign jurisdiction and to
permit the securities so deposited to be held in the nominee name of the
depository bank, provided that the Trustee's records and accounts show that
such securities belong to the Trust Fund.
(u) Any dispute under this Agreement shall be resolved by submission of
the issue to a member of the American Arbitration Association who is chosen by
the Employer and the Trustee. If the Employer and the Trustee cannot agree on
such a choice, each shall nominate a member of the American Arbitration
Association, and the two nominees will then select an arbitrator. Expenses
of the arbitration shall be paid as decided by the arbitrator.
(v) The Trustee is authorized to tape record conversations between the
Trustee and persons acting on behalf of the Plan or a participant in the Plan
to verify data on transactions.
(w) As stated in Article Number 4.8 of the Plan Document, each
participant and/or beneficiary may have investment power over the account
maintained for him or her, and may direct the investment and reinvestment of
assets of the account among the options authorized by the Administrator. Such
direction shall be furnished to the Trustee in writing or some other agreed
upon format established under procedures agreed to by the Trustee and
Administrator. To the extent provided under ERISA section 404(c), the Trustee
shall not be liable for any loss, or by reason of any breach, which results
from such participant's or beneficiary's exercise of control. If a participant
who has investment authority under the terms of the Plan fails to provide such
directions, the Administrator shall direct the investment of the participant's
account. The Adminsitrator shall maintain records showing the interest of each
participant and/or beneficiary in the Trust Fund. The Trustee shall have no
duty or responsibility to review or make recommendations regarding investments
made at the direction of the Administrator or participant and shall be required
to act only upon receipt of properly authorized directions. A participant or
beneficiary shall not have authority to direct the investment of assets in his
or her account in "collectibles" within the meaning of Code section 408(m)(2).
Section 7.2 of the Plan and Trust Document has been amended to add:
<PAGE> 2
(f) To the extent permitted under applicable laws, to invest in
deposits, long and short term debt instruments, stocks, and other securities,
including those of the Trustee, The Charles Schwab Corporation (the "Public
Company"), Charles Schwab and Company, Inc. (the "Broker/Dealer"), their
affiliates and subsidiaries.
The following Section has been added:
7.13 AFFILIATED COMPANY
(a) The Trustee is authorized to contract or make other
arrangements with The Charles Schwab Corporation (the "Public Company"),
Charles Schwab and Co., Inc. (the "Broker/Dealer"), their affiliates and
subsidiaries, successors and assigns, and any other organizations affiliated
with or subsidiaries of the Trustee or related entities, for the provision of
services to the Trust or Plan, except where such arrangements are prohibited by
law or regulation.
(b) The Trustee is authorized to place securities orders, settle
securities trades, hold securities in custody, and other related activities on
behalf of the Trust through or by the Broker/Dealer whenever possible, unless
the Authorized Person specifically instructs the use of another broker/dealer.
Trades (and related activities) conducted through the Broker/Dealer shall be
subject to fees and commissions established by the Broker/Dealer, which may be
paid from the Trust or netted from the proceeds of trades.
Trades shall not be executed through the Broker/Dealer unless the Administrator
and the Authorized Person have received disclosure concerning the relationship
of the Broker/Dealer to the Trustee, and fees and commissions which may be paid
to the Public Company, Broker/Dealer, the Trustee and/or affiliates or
subsidiaries as a result of using the Broker/Dealer's execution of other
services.
The Trustee is authorized to disclose such information as is necessary to the
operation and administration of the Trust to the Public Company or any of its
affiliates, and to such other persons or organizations that the Trustee
determines have a legitimate business purpose for obtaining such information.
(c) At the Direction of the Administrator (or other Authorized
Person), the Trustee may purchase shares of regulated investment companies (or
other investment vehicles) advised by the Holding Company, Broker/Dealer or the
Trustee or any affiliate of any of them ("Schwab Funds") except to the extent
that such investment is prohibited by law or regulation.
Uninvested cash of the Trust may be invested in Schwab Funds designated
by the Administrator (or other Authorized Person) for that purpose, unless the
Administrator specifically instructs the use of another fund or account, except
to the extent prohibited by law or regulation.
Schwab Fund shares may not be purchased or held by the Trust unless the
Administrator has received disclosure concerning the Public Company's,
Broker/Dealer's, the Trustee's and/or their affiliate's or subsidiary's
relationship to the Funds, and any fees which may be paid to the Public
Company, Broker/Dealer, Trustee and/or their affiliates or subsidiaries.
Executed by the Employer this 2nd day of July, 1993.
TELXON CORPORATION
/s/ Dan R. Wipff, President
- --------------------------- -----------------------------------
Witness as to Employer Employer
- --------------------------- -----------------------------------
Witness as to Trustee Trustee
(Charles Schwab Trust Company)
Date:
---------------------------
<PAGE> 1
10.1.1.b
AMENDMENT NUMBER TWO TO THE
TELXON'S RETIREMENT AND UNIFORM MATCHING PROFIT SHARING PLAN
Effective Date: April 1, 1994
Section 1.14, "EMPLOYEE" of the Plan and Trust Document, is hereby amended to
include the following provision:
Employee shall not include any person rendering service on a temporary
basis (as determined by the usual or historical categories of
employment as established by the Employer or any of its affiliates),
or employees classified as casual labor, or else a person serving
solely as a director of the Employer or any of the Employer's
affiliates.
Participants in the above classification will no longer be eligible
for participation on or after the above effective date.
Executed by the Employer on the 1st day of April, 1994
--- ----- --
TELXON CORPORATION
/s/ Meg Pais By /s/ Dan R. Wipff, Pres.
- ------------------------------------ -----------------------------
Witness as to Employer Employer
MICRO OFFICE SYSTEM TECHNOLOGY
/s/ Meg Pais By /s/ Dan R. Wipff, Pres.
- ------------------------------------ -----------------------------
Witness as to Participating Employer Participating Employer
TELETRANSACTION
/s/ Meg Pais By /s/ Yung Fu Chang
- ------------------------------------ -----------------------------
Witness as to Participating Employer Participating Employer
PTC AIRCO
/s/ Meg Pais By /s/ Dan R. Wipff, Pres.
- ------------------------------------ -----------------------------
Witness as to Participating Employer Participating Employer
<PAGE> 2
Page Two, continued
Effective Date: April 1, 1994
AMENDMENT NUMBER TWO TO THE
TELXON'S RETIREMENT AND UNIFORM MATCHING PROFIT SHARING PLAN
RETAIL TECHNOLOGY GROUP
/s/ Meg Pais By /s/ Dan R. Wipff
- ------------------------------------ -----------------------------
Witness as to Participating Employer Participating Employer
AIRONET CORPORATION
/s/ Meg Pais By /s/ Robert A. Eberle, Secretary
- ------------------------------------ -----------------------------
Witness as to Participating Employer Participating Employer
PENRIGHT! CORPORATION
/s/ Meg Pais By /s/ Robert A. Eberle, Secretary
- ------------------------------------ -----------------------------
Witness as to Participating Employer Participating Employer
METANETICS CORPORATION
/s/ Meg Pais By /s/ Robert A. Eberle, Secretary
- ------------------------------------ -----------------------------
Witness as to Participating Employer Participating Employer
<PAGE> 1
EXHIBIT 10.1.2
TELXON CORPORATION
1988 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Plan are to encourage
ownership of stock of the Company by officers and other key Employees, to
attract and retain highly qualified personnel for positions of substantial
responsibility, to provide additional incentive to all Employees of the Company
and its Subsidiaries and to promote the success of the Company's business.
Options granted under the Plan may be incentive stock options (as defined under
and subject to the applicable provisions of Section 422A of the Code and the
regulations promulgated thereunder), options which are intended to qualify under
other particular provisions of the Code as in effect from time to time, or
non-statutory stock options as determined by the Committee at the time of grant
of an Option.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(c) "COMMITTEE" shall mean the Committee appointed by the Board in
accordance with Paragraph (a) of Section 4 of the Plan, if a Committee is
appointed. If no Committee has been appointed, any reference to the "Committee"
shall be deemed a reference to the "Board".
(d) "COMMON STOCK" shall mean the Common Stock, par value $.01 per share,
of the Company.
(e) "COMPANY" shall mean Telxon Corporation, a Delaware corporation.
(f) "CONTINUOUS EMPLOYMENT" shall mean, with respect to any Employee, the
absence of any interruption or termination of employment by the Company or any
Subsidiary. Continuous Employment shall not be considered interrupted in the
case of sick leave, military leave or any other leave of absence approved by the
Board (provided that such leave is for a period of not more than ninety (90)
days or re-employment upon the expiration of such leave is mandated by contract
or statute) or in the case of transfers between locations of the Company or
between the Company, its Subsidiaries or any of their respective successors.
(g) "DISINTERESTED PERSON" shall have the meaning set forth in Rule
16b-3(d)(3) promulgated by the Securities and Exchange Commission pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended from time to
time and as interpreted by the Securities and Exchange Commission.
(h) "EMPLOYEE" shall mean any person, including officers and directors,
employed by the Company or any Subsidiary. The payment of director's fees by the
Company shall not be sufficient to constitute a person as an "Employee" of the
Company.
(i) "OPTION" shall mean a stock option (including an Incentive Stock
Option) granted pursuant to the Plan. "Incentive Stock Option" shall mean a
stock option granted pursuant to the Plan and intended to qualify as an
incentive stock option pursuant to the provisions of Section 422A of the Code
and the regulations promulgated thereunder.
(j) "OPTIONED STOCK" shall mean the Common Stock subject to an Option.
(k) "OPTIONEE" shall mean an Employee who receives an Option.
(l) "PARENT CORPORATION" shall have the meaning as defined in Section
425(e) of the Code.
(m) "PLAN" shall mean this 1988 Stock Option Plan.
1
<PAGE> 2
(n) "SHARE" shall mean the Common Stock as adjusted in accordance with
Section 11 of the Plan.
(o) "SUBSIDIARY" shall mean a corporation of which not less than fifty
percent (50%) of the voting shares are owned by the Company or a Subsidiary
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be issued and sold
under Options granted pursuant to the Plan is 1,200,000 Shares of Common Stock.
The Shares may be treasury Shares or Shares of original issue or a combination
of the foregoing. If an Option shall expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for other Options under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board provided a
majority of the Board are Disinterested Persons, and a majority of the Board
acting in any given matter are Disinterested Persons, or the Board may, in its
discretion, appoint a Committee which shall consist of not less than three (3)
members, each of whom is a Disinterested Person, to administer the Plan subject
to such terms and conditions as the Board may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and may appoint
additional members thereof, remove members, with or without cause, and appoint
new members in substitution therefor, fill vacancies however caused and remove
all members of the Committee and thereafter directly administer the Plan;
provided, however, that at no time shall a person not a Disinterested Person
serve on the Committee nor shall a Committee of less than three (3) members
administer the Plan. Members of the Board who are not Disinterested Persons may
not vote on any matters affecting the administration of the Plan or the grant of
any Options pursuant to the Plan, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board during which
action is taken with respect to the granting of Options or the administration of
the Plan. As used in the Plan and in any Option, the term "Committee" shall
refer to either the Committee or to the Board if no Committee has been
appointed.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion:
(i) To determine, upon review of relevant information in accordance
with Section 8(b) of the Plan, the fair market value of the Shares;
(ii) To determine the exercise price per Share of Options to be
granted, which exercise price shall in no event be less than the fair
market value per Share determined as of the date of grant of the Option;
(iii) To determine the Employees to whom, and the time or times at
which, Options shall be granted and the number of Shares subject to
purchase upon exercise of each Option;
(iv) To interpret the Plan;
(v) To determine whether Options shall become vested over a period of
time and when they shall become fully vested;
(vi) To determine when Options may be exercised;
(vii) To prescribe, amend and rescind, if deemed necessary or
appropriate, rules and regulations relating to the Plan;
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<PAGE> 3
(viii) To determine the terms and provisions of each Option (which
terms and provisions need not be identical) and, with the consent of the
holder thereof, modify or amend each Option;
(ix) To accelerate (with the consent of the Optionee) the exercise
date of any Option, consistent with the provisions of Section 5 of the
Plan;
(x) To authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
by the Committee; and
(xi) To make all other determinations deemed necessary or advisable in
connection with the administration of the Plan.
(c) EFFECT OF COMMITTEE'S DECISIONS. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Optionees and
any other holders of any Options.
5. ELIGIBILITY. Options may be granted only to Employees. An Employee who
has been granted an Option may, if he is otherwise eligible, be granted
additional Options.
No Incentive Stock Option may be granted to an Employee which, when
aggregated with all other Incentive Stock Options granted to such Employee after
December 31, 1986, by the Company or any Parent Corporation or Subsidiary, would
result in Shares having an aggregate fair market value (determined for each
Share as of the date of grant of the Option covering such Share) in excess of
$100,000 becoming first available for purchase upon exercise of one or more
Incentive Stock Options during any calendar year.
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment by the Company or any Subsidiary nor shall it
interfere in any way with his right or the Company's or any Subsidiary's right
to terminate his employment at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier of its
adoption by the Board or its approval by vote of the holders of a majority of
the outstanding Shares of the Company entitled to vote on the adoption of the
Plan. The Plan shall continue in effect for a term of ten (10) years from the
date of its adoption by the Board, unless sooner terminated under Section 13 of
the Plan. Pending stockholder approval of the Plan, Option grants may be made by
the Committee, subject to stockholder approval of the Plan, but no Option may be
exercised prior to the date stockholder approval is obtained.
7. TERM OF OPTION. The term of each Option shall be ten (10) years from the
date of grant thereof or such shorter term as may be provided in the Option, and
each Option shall continue in effect in accordance with its terms
notwithstanding that the term of the Plan may expire or be terminated prior to
the expiration of the term of such Option. However, in the case of an Incentive
Stock Option granted to an Optionee who at the time the Incentive Stock Option
is granted owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent
Corporation or Subsidiary, the term of the Incentive Stock Option shall be five
(5) years from the date of grant thereof or such shorter time as may be provided
in the Incentive Stock Option.
8. OPTION PRICE AND CONSIDERATION.
(a) The per Share option price for the Shares to be issued pursuant to an
Option shall be such price as is determined by the Committee but shall in no
event be less than the fair market value per Share as of the date of grant of
the Option. In no event shall the per Share Option price be less than 110% of
the fair market value per Share as of the date of grant in the case of an
Incentive Stock Option granted to an Optionee who at the time such Option is
granted owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Parent Corporation or
Subsidiary.
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(b) For purposes of the Plan, fair market value per Share shall be
determined by the Committee in its discretion; provided, however, that if the
Shares are listed on the NASDAQ National Market System or on a stock exchange,
the fair market value per Share shall be the closing price on such quotation
system or exchange on the last trading day prior to the date of determination
for which a sale price was reported.
(c) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Committee on the date of grant. Such consideration may consist of cash, check,
previously owned Shares or any combination of the foregoing.
9. METHOD OF EXERCISE.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Committee and as permitted under the Plan. An Option may not
be exercised for a fraction of a share. An Option shall be deemed to be
exercised when written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to exercise the
Option. In the case of the purchase of Shares, notice shall be effective only if
accompanied by full payment for the Shares. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock notwithstanding the exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter shall be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF EMPLOYMENT. If an Optionee shall cease to be employed by
the Company (otherwise than by reason of the Optionee's death, permanent and
total disability or retirement), he may exercise his Option (to the extent that
he was entitled to exercise it at the time of such termination of employment)
until the earlier of (i) the date thirty (30) days (or such other period of time
not exceeding three (3) months as is determined by the Committee at the time of
such termination of employment) after the effective date of the termination of
his employment or (ii) the expiration date of such Option, and the Option shall
terminate on the earlier of such dates; provided, however, that if the Optionee
is terminated by the Company for "misconduct", then such Option shall thereupon
terminate immediately. As used herein, "misconduct" means that the Optionee has
engaged in unfair competition with the Company or a Subsidiary, induced any
customer of the Company or a Subsidiary to breach any contract with the Company
or a Subsidiary, made any unauthorized disclosure of any of the trade secrets or
confidential information of the Company or a Subsidiary, committed an act of
embezzlement, fraud or theft with respect to the property or business of the
Company or a Subsidiary or deliberately disregarded the rules of the Company or
a Subsidiary in such a manner as to cause material loss, damage or injury to or
otherwise endanger the property, reputation, employees or business prospects of
the Company or a Subsidiary. The Committee shall determine whether an Optionee's
employment is terminated by reason of misconduct. In making such determination,
the Committee may, but shall not be required to, give the Optionee an
opportunity to be heard and to present evidence on his behalf.
(c) DEATH OF OPTIONEE. Upon the death of an Optionee:
(i) who is at the time of his death in the employ of the Company and
who shall have been in Continuous Employment since the date of grant of the
Option, the Option may be exercised (to the extent the Optionee would have
been entitled to do so had he continued living and terminated employment
six (6) months after the date of death) by the Optionee's
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<PAGE> 5
estate or by a person who acquires the right to exercise the Option by
bequest or inheritance until the earlier of (A) the date six (6) months
(three (3) months in the case of an Incentive Stock Option) following the
date of the Optionee's death or (B) the expiration date of such Option,
and the Option shall terminate on the earlier of such dates; or
(ii) within one (1) month after the termination of Continuous
Employment other than termination by the Company for misconduct or due to
disability, the Option may be exercised (to the extent the Optionee was
entitled to do so at the date of termination of Continuous Employment) by
the Optionee's estate or by a person who acquires the right to exercise the
Option by bequest or inheritance until the earlier of (A) the date six (6)
months following the date of the Optionee's death (three (3) months after
the termination of Continuous Employment in the case of an Incentive Stock
Option) or (B) the expiration date of such Option, and the Option shall
terminate on the earlier of such dates.
(d) DISABILITY OF OPTIONEE. If the Optionee ceases to be employed by the
Company or a Subsidiary due to his having become permanently and totally
disabled within the meaning of Section 22(e)(3) of the Code ("disability"), the
Option may be exercised (to the extent the Optionee shall have been entitled to
do so as of the effective date of the termination of his employment on account
of his having become so disabled) until the earlier of (i) the date one (1) year
after the effective date of the termination of his employment and (ii) the
expiration date of such Option, and the Option shall terminate on the earlier of
such dates.
(e) RETIREMENT OF OPTIONEE. If an Optionee ceases to be employed by the
Company or any Subsidiary by reason of his retirement (A) entitling him to
benefits under the provisions of any retirement plan of the Company or any
Subsidiary in which such Optionee participates; or (B) upon attaining age 65,
the Option may be exercised (to the extent the Optionee shall be entitled to do
so as of the effective date of the termination of his Employment by reason of
such retirement) until the earlier of (i) the date three (3) months after the
effective date of the termination of his Employment and (ii) the expiration date
of such Option, and the Option shall terminate on the earlier of such dates.
(f) STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. When an
Optionee incurs tax liability in connection with the exercise of an Option,
which tax liability is subject to tax withholding under applicable tax laws, and
the Optionee is obligated to pay the Company an amount required to be withheld
under applicable tax laws, the Optionee may satisfy such withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
upon exercise of the Option that number of Shares having a fair market value
equal to the amount required to be withheld. The fair market value of the Shares
to be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined (the "Tax Date") in accordance with Section 8(b) of
the Plan.
All elections by an Optionee to have Shares withheld for tax withholding
purposes shall be made in writing in a form acceptable to the Committee and
shall be subject to the following restrictions:
(i) The election must be made on or prior to the applicable Tax Date;
(ii) Once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
(iii) All elections shall be subject to the consent or disapproval of
the Committee;
(iv) If the Optionee is an officer or director of the Company or other
person whose transactions in the Company's securities are subject to
Section 16(b) of the Securities Exchange Act of 1934 (collectively
"Insiders"), the election may not be made within six (6) months of the date
of grant of the Option; provided, however, that this limitation shall not
apply in the event that death or disability of the Optionee occurs prior to
the expiration of the six-month period; and
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(v) If the Optionee is an Insider, the election must be made either
six (6) months prior to the Tax Date (as determined in accordance with
Section 83 of the Code) or during the period beginning on the third (3rd)
business day, and ending on the twelfth (12th) business day, following the
release of the Company's quarterly or annual summary statement of sales and
earnings.
If the election to have Shares withheld is made by an Optionee who is an
Insider and the Tax Date is deferred until six (6) months after exercise of the
Option because no election is filed under Section 83(b) of the Code, the
Optionee shall receive the full number of Shares with respect to which the
Option is exercised, but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
In lieu of or in addition to having Shares to be issued upon exercise of an
Option withheld by the Company, the Optionee shall have the right to borrow from
the Company an amount sufficient to pay the income tax liability resulting from
the exercise of an Option. Such loan shall be for a term of five (5) years at a
rate of interest equal to the Company's then primary commercial lender's prime
or base rate as in effect from time to time. Payments of interest on such loan
shall be made quarterly and the principal shall be repaid at the earlier of the
expiration of the five (5) year term or a disposition of any of the Shares
acquired upon exercise of such Option.
10. NONTRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution and may be exercised during the
life of the Optionee only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) Subject to the provisions of Paragraph (b) hereof and to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation, termination or
expiration of an Option, as well as the price per Share covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of Shares, or any
other increase or decrease in the aggregate number of issued Shares effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration". Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, all
outstanding Options will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable.
Subject to the provisions of Paragraph (b) hereof, in the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger or consolidation of the Company with or into another corporation, each
outstanding Option shall be assumed or an equivalent option shall be substituted
by such successor corporation or a parent or subsidiary of such successor
corporation, unless the Board determines, in the exercise of its sole discretion
and in lieu of such assumption or substitution, that the Optionee shall have the
right to exercise the
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Option as to all of the Optioned Stock, including Shares as to which the Option
would not otherwise be exercisable. If in the event of a merger, consolidation
or sale of assets the Board makes an Option fully exercisable in lieu of
assumption or substitution, the Company shall notify the Optionee that the
Option shall be fully exercisable for a period of thirty (30) days from the date
of such notice, and the Option will terminate upon the expiration of such
period.
(b) In the event of a "Change in Control" of the Company, as defined in
Paragraph (c) below, unless otherwise determined by the Board prior to the
occurrence of such Change in Control, the following acceleration and valuation
provisions shall apply:
(i) Any Options outstanding as of the date of such Change in Control
that are not yet exercisable and vested on such date shall become fully
exercisable and vested; and
(ii) The value of all outstanding Options, measured by the excess of
the Change in Control Price (as hereinafter defined) over the option price,
shall, unless otherwise determined by the Board at or after grant, be
cashed out. The cash out proceeds shall be paid to the Optionee or, in the
event of death of an Optionee prior to payment, to the estate of the
Optionee or to a person who acquires the right to exercise the Option by
bequest or inheritance.
(c) DEFINITION OF "CHANGE IN CONTROL". For purposes of this Section 11, a
"Change in Control" means the happening of any of the following:
(i) When any "person", as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (other
than the Company, a Subsidiary or a Company or Subsidiary employee benefit
plan, including any trustee of such plan acting as trustee) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power of
the Company's then outstanding securities; or
(ii) The consummation of a transaction requiring stockholder approval,
and involving the sale of all or substantially all of the assets of the
Company or the merger or consolidation of the Company with or into another
corporation.
(d) CHANGE IN CONTROL PRICE. For purposes of this Section 11, "Change in
Control Price" shall be, as determined by the Board, (i) the highest closing
sale price of a Share as reported by the NASDAQ National Market System (or, if
the Shares are listed on a stock exchange, the highest closing price on such
exchange as reported by such exchange), at any time within the sixty (60) day
period immediately preceding the date of the Change in Control (the "Sixty-Day
Period"), or (ii) the highest price paid or offered, as determined by the Board,
in any bona fide transaction or bona fide offer related to the Change in Control
of the Company, at any time within the Sixty-Day Period.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date on which the Committee makes the determination granting
such Option. Notice of the determination shall be given to each Employee to whom
an Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF PLAN.
(a) AMENDMENT AND TERMINATION. The Board may from time to time amend or
terminate the Plan in such respects as the Board may deem advisable, except
that, without approval of the holders of a majority of the outstanding shares of
the Company entitled to vote thereon, no such revision or amendment shall:
(i) materially increase the number of Shares subject to the Plan other
than in connection with an adjustment under Section 11 of the Plan;
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(ii) materially change the designation of the class of employees
eligible to be granted Options;
(iii) materially increase the benefits accruing to participants under
the Plan; or
(iv) remove the administration of the Plan from the Board or the
Committee;
provided, however, that no amendment to the Plan approved by the Board and
described in clauses (i), (ii) or (iii) above shall be required to be submitted
to stockholders if, in the formal or informal opinion of the Staff of the
Securities and Exchange Commission, such amendment would not be required to be
submitted for the approval of stockholders in order to ensure the continued
applicability of Rule 16b-3 to the Plan.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or termination
of the Plan shall not affect Options already granted, and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933,
the Securities Exchange Act of 1934, the rules and regulations promulgated
thereunder, any applicable state "blue sky" laws, and the requirements of any
inter-dealer quotation system or stock exchange upon which the Shares may then
be included or listed, and shall be further subject to the approval of counsel
for the Company with respect to such compliance.
As a condition to the exercise of an Option or the issuance of Shares on
exercise of an Option, the Company may require the person exercising such Option
to represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned laws.
15. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. OPTION AGREEMENTS. Options shall be evidenced by written agreements or
grants in such form as the Board or the Committee shall approve.
17. ADOPTION OF PLAN. This Stock Option Plan was adopted by the Board on
and shall be effective as of May 13, 1988, and shall terminate on May 12, 1998,
and no Option shall be granted after such latter date. This Plan shall terminate
and all Options granted hereunder shall be cancelled unless the Plan is approved
by the holders of a majority of the outstanding Shares of the Company entitled
to vote on the adoption of the Plan within one (1) year of the date of adoption
of the Plan.
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Exhibit 10.1.2.a
AMENDMENTS TO TELXON CORPORATION
1988 STOCK OPTION PLAN
ADOPTED BY THE BOARD OF DIRECTORS
OF TELXON CORPORATION
ON JANUARY 31, 1990
Section 1(g) of the Telxon Corporation 1988 Stock Option Plan (the
"Plan") has been amended and restated to read as follows:
(g) "DISINTERESTED PERSON" shall have the meaning set forth
in Rule 16b-3(d)(3) promulgated by the Securities and Exchange
Commission pursuant to Section 16(b) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as such Rule may from
time to time be amended and interpreted by the Securities and
Exchange Commission.
Section 4(a) of the Plan has been amended and restated to read as
follows:
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. Except as otherwise required elsewhere in
the Plan, the Plan shall be administered by the Board or, if the
Board so determines in its discretion, by a Committee appointed by
the Board from among its own number of not less than three (3)
members (or such lesser number as may be permitted pursuant to Rule
16b-3 promulgated by the Securities and Exchange Commission
pursuant to Section 16(b) of the Exchange Act, as such Rule may
from time to time be amended and interpreted by the Securities and
Exchange Commission ("Rule 16b-3")), all of the members of which
Committee shall be Disinterested Persons. Such Committee, if
appointed, shall carry out its appointed functions subject to such
terms and conditions as the Board may prescribe and, once
appointed, shall continue to serve until otherwise directed by the
Board. From time to time, the Board may change the size of the
Committee and may appoint additional members thereof, remove
members with or without cause and appoint new members in
substitution therefor, fill vacancies however caused and remove all
members of the Committee and thereafter directly administer the
Plan; provided, however, that at no time shall a Committee of less
than three (3) members (or such lesser number as may be permitted
pursuant to Rule 16b-3) administer the Plan. As used in the Plan
and in any Option, the term "Committee" shall refer to either the
Committee or, if no Committee has been appointed, to the Board.
<PAGE> 2
A new Section 4(d) has been added to the Plan reading as follows:
(e) GRANTS TO EMPLOYEE DIRECTORS. To the extent necessary
for Options granted to Employees who at the time of grant are also
directors of the Company to qualify for the exemption from Section
16(b) of the Exchange Act available under Rule 16b-3, Options may
be granted to such Employees by the Board only if a majority of the
Board and a majority of the directors acting in the matter are
Disinterested Persons or, if a Committee has been appointed, by the
Committee, and all determinations in connection with the granting
of such Options, including, without limitation, the selection of
those of such Employees to whom are to be granted Options and the
determination of the number of Shares covered by the Options to be
granted to such Employees, shall be made only by the Board
constituted and acting as hereinabove required in this Section 4(e)
or, if a Committee has been appointed, by the Committee.
Clauses (iii) and (iv) of the second paragraph of Section 9(f) of the
Plan have been amended and restated to read as follows:
(iii) All elections shall be subject to the consent or
disapproval of the Committee, provided that at any time the Plan is
administered by the Board by reason of a Committee not having been
appointed, an election made by an Optionee who is an officer or
director of the Company or other person whose transactions in the
Company's securities are subject to Section 16(b) of the Exchange
Act (each such officer, director or other person being hereinafter
referred to an "Insider") may be consented to by the Board only if
a majority of the Board and a majority of the directors acting in
the matter are Disinterested Persons;,
(iv) If the Optionee is an Insider, the election may not be
made within six (6) months of the date of grant of the Option;
provided, however, that this limitation shall not apply in the
event that death or disability of the Optionee occurs prior to the
expiration of said six-month period; and
Clause (i) of Section 11(c) of the Plan has been amended and restated to
read as follows:
(i) When any "person", as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company, a
Subsidiary or a Company or Subsidiary employee benefit plan,
including any trustee of such plan acting as trustee) becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated by the
Securities and Exchange Commission pursuant to the Exchange Act, as
such Rule may be amended from time to time), directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; or
<PAGE> 1
EXHIBIT 10.1.3
TELXON CORPORATION
1990 STOCK OPTION PLAN
AS AMENDED
1. PURPOSE OF THE PLAN. The purpose of this plan is to promote the best
interests of the Company and its stockholders by enabling the Company and its
Subsidiaries to attract and retain highly qualified personnel through rewarding
valued employees with the opportunity, pursuant to Options granted under the
Plan, to acquire a proprietary interest in the Company and thereby encourage
them to put forth their maximum efforts for the continued success and growth of
the Company.
2. DEFINITIONS. In addition to such other capitalized terms as are defined
elsewhere in this Plan, the following terms shall when used in this Plan have
the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended from
time to time.
(b) "Authorized Shares" means the maximum aggregate number of shares
of Common Stock specified in Section 3(a) as being authorized for issuance
and sale under Options granted pursuant to the Plan, subject to adjustment
thereof in accordance with Section 12 of the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Commission" means the United States Securities and Exchange
Commission.
(f) "Committee" means the Committee appointed by the Board in
accordance with Paragraph (a) of Section 4 of the Plan, if a Committee is
appointed. The members of such Committee may, but need not, be members of
the Board. If no Committee has been appointed, any reference to the
"Committee" shall be deemed a reference to the "Board".
(g) "Common Stock" means the Common Stock, par value $.01 per share,
of the Company.
(h) "Company" means Telxon Corporation, a Delaware corporation.
(i) "Continuous Employment" means with respect to any Employee, the
continued employment of such Employee by the Company or any Subsidiary
without interruption or termination after the grant of an Option to such
Employee. Continuous Employment shall not be considered interrupted in the
case of sick leave, military leave or any other leave of absence approved
by the Board (provided that such leave is for a period of not more than
ninety (90) days or re-employment upon the expiration of such leave is
mandated by contract or statute) or in the cause of transfers between
locations of the Company or between the Company, any Subsidiary or any of
their respective successors.
(j) "Employee" means any person, including officers and directors who
are also officers, employed by the Company or any Subsidiary. The payment
of director's fees by the Company shall not be sufficient to constitute a
person as an "Employee" of the Company.
(k) "Option" means a right granted to an Employee pursuant to the Plan
to purchase a specified number of shares of Common Stock at a specified
price during a specified period and on such other terms and conditions as
may be specified pursuant to the Plan. Options
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may be granted as Tax Qualified Options or as Options which do not
qualify as Tax Qualified Options.
(l) "Option Agreement" means the written agreement evidencing an
Option by and between the Company and the Optionee as required by Section
14.
(m) "Optioned Stock" means the Company Stock subject to an Option.
(n) "Optionee" means an Employee who receives an Option.
(o) "Plan" means this 1990 Stock Option Plan.
(p) "Predecessor Plan" means the Company's 1988 Stock Option Plan.
(q) "Rule 16b-3" means Rule 16b-3 promulgated by the Commission under
the Act or any similar successor regulation exempting certain transactions
involving stock-based compensation arrangements from the liability
provisions of Section 16 of the Act, as adopted and amended from time to
time and as interpreted by formal or informal opinions of, and releases
published or other interpretive advice provided by, the Staff of the
Commission.
(r) "Section 16 Person" means an Employee who is subject to Section 16
of the Act, as interpreted by the rules and regulations promulgated by the
Commission thereunder, as adopted and amended from time to time, and by
formal or informal opinions of, and releases published or other
interpretive advice provided by, the Staff of the Commission.
(s) "Securities Law Requirements" means the Act and the rules and
regulations promulgated by the Commission thereunder, as adopted and
amended from time to time, including but not limited to Rule 16b-3, and as
interpreted by formal or informal opinions of, and releases published or
other interpretive advice provided by, the Staff of the Commission, and the
requirements of any stock exchange, automated interdealer quotation system
or other recognized securities market on which the Common Stock is listed
or traded or in which the Common Stock is included, as adopted and amended
from time to time and as interpreted by formal or informal opinions of, and
other interpretive advice, provided by the representatives of such stock
exchange, quotation system or other securities market.
(t) "Shares" means the Common Stock as adjusted in accordance with
Section 12 of the Plan.
(u) "Subsidiary" means a corporation of which not less than fifty
percent (50%) of the voting shares are owned by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(v) "Successor" means the estate of an Optionee or a person who
succeeds by will or the laws of descent and distribution to an Optionee's
right to exercise an Option.
(w) "Tax Qualified Option" means an Option which is intended at the
time of grant to qualify for special tax treatment under Section 422A or
other particular provisions of the Code and the regulations, rulings and
procedures promulgated, published or otherwise provided thereunder, as
adopted and amended from time to time.
3. STOCK SUBJECT TO THE PLAN.
(a) NUMBER OF SHARES ISSUABLE. Subject to adjustment in accordance
with the provisions of Section 12 of the Plan, the maximum aggregate number
of Authorized Shares which may be issued and sold under Options granted
pursuant to the Plan is 1,500,000 shares of Common Stock, plus such number
of the 1,200,000 shares of Common Stock authorized for issuance and sale
under the Predecessor Plan which (i) as of the date this Plan is approved
by the stockholders of the Company, are not subject to grants (including
conditional grants) of stock options then outstanding under the Predecessor
Plan (from and after
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stockholder approval of this Plan, no further grants shall be made
under the Predecessor Plan, but any grants (including conditional grants)
of stock options outstanding under the Predecessor Plan at the time of
such approval shall continue in full force and effect in accordance with
their respective terms) or (ii) to the extent grants (including
conditional grants) outstanding under the Predecessor Plan as of the date
of stockholder approval of this Plan are not exercised in full, are, as of
any subsequent date, (A) issued pursuant to the exercise of a stock option
granted under the Predecessor Plan in an amount equal to the number of
Shares already owned by the person exercising such stock option which are
delivered by such person to the Company in payment of the exercise price
and/or related withholding taxes, (B) withheld by the Company, in payment
of the withholding taxes with respect to the exercise of a stock option
granted under the Predecessor Plan, from the total number of Shares with
respect to which such option is exercised, or (C) no longer subject to
grants under the Predecessor Plan by reason of such grants having expired
or lapsed or having been cancelled, surrendered, forfeited or otherwise
terminated. The inclusion under this Plan of such shares reserved for
issuance and sale under the Predecessor Plan as hereinabove provided shall
not be affected by the expiration or other termination of the Predecessor
Plan. The Shares issued and sold upon the exercise of Options may be
treasury Shares, Shares of original issue or a combination thereof.
(b) COMPUTATION OF SHARES AVAILABLE FOR GRANT. For purposes of
computing the number of Authorized Shares available from time to time under
the Plan for the grant of Options, the number of Shares subject to each
Option granted pursuant to the Plan shall be provisionally counted against
the Authorized Shares from and after the grant of such Option but only for
so long as and to the extent that such Option shall remain outstanding and
unexercised. Upon the exercise, in whole or in part, of an Option, the
number of Shares issued upon such exercise shall be permanently deducted
from the authorized Shares, provided that no such permanent deduction shall
be made, and the provisional deduction against the Authorized Shares shall
be reversed, to the extent that the exercise price and/or the withholding
taxes with respect to such exercise are paid through the delivery to the
Company by the person exercising the option of Shares already owned by such
person and/or through the withholding by the Company of Shares from the
total number of Shares with respect to which the Option is exercised. The
provisional deduction against the Authorized Shares shall likewise be
reversed to the extent of the unexercised portion of an Option upon the
expiration, lapse, cancellation, surrender, forfeiture or other termination
of such Option. The Shares covered by any such reversal of a provisional
deduction against the Authorized Shares shall immediately become available
for the granting of new Options under the Plan with respect thereto.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board or the
Board may, in its discretion, appoint a Committee to administer the Plan
subject to such terms and conditions as the Board may prescribe; provided
that the terms upon which, including the time or times at or within which,
and the price or prices at which Shares may be purchased upon the exercise
of Options shall be approved or ratified by such action of the Board or a
committee duly designated by the Board from its members as may be required
by the Delaware General Corporation Law, as amended from time to time; and
provided further, that neither the Board nor any such Committee shall make
any decision concerning the Plan with respect to any Section 16 Person
unless the Board or such Committee making such decision is constituted so
that such decision complies with the applicable requirements of Rule 16b-3.
Once appointed, the Committee shall continue to serve until otherwise
directed by the Board. From time to time the Board may increase the size of
the Committee and may appoint additional members thereof, remove members
(with or without cause), fill vacancies however caused and remove all
members of the Committee and thereafter directly administer the Plan.
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(b) POWERS OF THE COMMITTEE. Subject to the provisions of this Plan,
the Committee shall have the authority, in its sole discretion:
(i) To determine, upon review of relevant information in accordance
with Section 7(b) of the Plan, the "Fair Market Value" (as defined in
said Section 7(b)) of the Shares;
(ii) To determine the Employees to whom, and the time or times at
which, Options shall be granted and the number of Shares subject to
purchase upon exercise of each Option (there being no limit on the time
following the adoption or approval of this Plan within which Options may
be granted under the Plan so long as it remains in effect, on the number
of Options which may be granted to any one Employee or on the aggregate
number of Shares subject to purchase thereunder, except such
restrictions thereon as may be imposed by applicable tax laws which will
have to be observed if the Committee intends that a particular Option
qualify as a Tax Qualified Option);
(iii) To determine the terms and provisions of each Option (which
terms and provisions need not be identical), including, but not limited
to, the following:
(A) The exercise price per Share, subject to the provisions of
Section 7 of the Plan; and
(B) Whether Options shall become exercisable over a period of
time and when they shall be fully exercisable;
(iv) To accelerate the time as of which any Option may be
exercised;
(v) To amend any outstanding Option, subject to the provisions of
Section 19 of the Plan;
(vi) To authorize any person to prepare and execute on behalf of
the Company any instrument deemed by the Committee to be necessary or
advisable to evidence or effectuate the Plan, any Option granted
thereunder or any amendment to the Plan or any Option;
(vii) To interpret the Plan;
(viii) To prescribe, amend and rescind, if deemed necessary or
appropriate, rules and regulations relating to the Plan; and
(ix) To make all other determinations the Committee may deem
necessary or advisable in connection with the administration of the
Plan.
(c) EFFECTS OF BOARD AND COMMITTEE DECISIONS. All decisions,
determinations and actions of the Board and the Committee in connection
with the construction, interpretation, administration, application,
operation and implementation of the Plan shall be final, conclusive and
binding on the Company, its stockholders and Subsidiaries, all Employees
and Optionees and the respective legal representatives, heirs, successors
and assigns of all of the foregoing and all other persons claiming under or
through any of them.
(d) EXCULPATION AND INDEMNIFICATION. No member of the Board on the
Committee, and no Employee or other agent acting on behalf of the Board or
the Committee, shall be personally liable for any decision, determination
or action made or taken, or failed to be made or taken, with respect to
this Plan or any Option granted hereunder, and the Company shall fully
protect each such person in respect of any such decision, determination or
action and shall indemnify each such person against any and all claims,
losses, damages, expenses and liabilities arising from or in connection
with any such decision, determination or action.
5. ELIGIBILITY. Options may be granted only to Employees who, in the sole
judgment of the Committee, have contributed or will contribute to the success
and growth of the Company.
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An Employee to whom the Company has previously granted a stock option pursuant
to this Plan or otherwise may, if he is otherwise eligible, be granted
additional Options.
The existence of this Plan shall not create in any Employee any right to be
granted an Option hereunder, and neither the existence of this Plan nor the
granting of any Options to any Employee hereunder shall confer upon such
Employee any right with respect to continuation of the employment of such
Employee by the Company or any Subsidiary or shall in any way interfere with or
limit the right which such Employee, the Company or any Subsidiary may otherwise
have to terminate such employment at any time with or without cause. Upon the
termination of any Employee's employment with the Company or any Subsidiary,
neither the Company nor any Subsidiary shall have any liability or obligation to
such Employee under this Plan or any Options granted to such Employee hereunder
except to issue the appropriate number of Shares to such Employee upon the
exercise of any Option granted to such Employee under this Plan prior to such
termination of employment, provided that such exercise is duly and timely made
in accordance with the provisions of this Plan and such Option.
6. TERM OF OPTIONS. Except as may otherwise be specified by the Committee
in its sole discretion at the time of grant thereof and reflected in the Option
Agreement evidencing such Option, the term of each Option shall be ten (10)
years from the date of grant thereof, provided that the Committee, if it intends
that a particular Option qualify as a Tax Qualified Option, will have to observe
such restrictions on the term of such Option as may be imposed by the applicable
tax laws in order for such Option so to qualify. Each Option shall continue in
effect in accordance with its terms notwithstanding that the Plan may be
terminated prior to the expiration of the term of such Option.
7. EXERCISE PRICE.
(a) MINIMUM PRICE REQUIRED. The per Share exercise price for the
Shares subject to an Option shall be such price as is determined by the
Committee at the time of grant of an Option and reflected in the Option
Agreement evidencing the same; provided that in no event shall such
exercise price per Share be less than the Fair Market Value per Share as of
the day prior to the date of grant of such Option.
(b) DEFINITION OF "FAIR MARKET VALUE". For all purposes under the
Plan, "Fair Market Value" per Share shall be determined by the Committee in
its sole discretion; provided that if the Shares are included in the NASDAQ
National Market System or listed on a stock exchange on the date as of
which the same is to be determined, the Fair Market Value per Share shall
be the closing price on such quotation system or exchange which is the
principal trading market for the Shares on the date of determination or, if
no sale price was reported for the Shares on the date of determination, the
closing price on such principal trading market for the last trading day
prior to the date of determination for which a sale price was reported;
provided further, however, that if the foregoing method of determining Fair
Market Value is inconsistent with the then existing tax law requirements
with respect to any Option which the Committee intends to qualify as a Tax
Qualified Option, then the Fair Market Value per Share shall be determined
by the Committee in such manner as is required for such Tax Qualified
Option to qualify as such.
8. WITHHOLDING TAXES. Before a stock certificate evidencing the Shares
being acquired through exercise of an Option will be issued to the Optionee, the
Optionee must pay, or make arrangements acceptable to the Company for the
payment of, any and all federal, state and local withholding taxes, whether
domestic or foreign, required to be withheld in connection with the exercise of
an Option.
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9. FORM OF PAYMENT.
(a) ACCEPTABLE FORMS OF CONSIDERATION. Except as may otherwise be
specified by the Committee in its sole discretion at the time of grant
thereof and reflected in the Option Agreement evidencing such Option, the
following forms of consideration will be accepted in payment of the
exercise price for the Shares to be issued upon exercise of an Option and
of the taxes required to be withheld in connection with such exercise: (i)
cash, (ii) personal check, (iii) bank cashier's check, (iv) already owned
Shares (duly endorsed for transfer with signature guaranteed), or (v) any
combination of the foregoing. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof and reflected
in the Option Agreement evidencing such Option, Shares withheld from the
Shares to be issued upon exercise of the Option, either alone or in any
combination with any of the other acceptable forms of consideration recited
in this Paragraph (a), will also be an accepted form of consideration for
payment of the taxes required to be withheld in connection with the
exercise of an Option. In addition to the acceptable forms of consideration
hereinabove recited in this Paragraph (a), the Committee may determine in
its sole discretion at the time of grant of an Option, and if the Committee
so determines, shall provide in the Option Agreement evidencing such
Option, that one or both of the following additional forms of consideration
will be accepted, either alone or in any combination with any of the other
acceptable forms of consideration recited in this Paragraph (a), in payment
of the items specified: (vi) in payment of the exercise price for the
Shares to be issued upon exercise of an Option, Shares withheld from the
Shares to be issued upon such exercise, and/or (vii) in payment of the
exercise price for the Shares to be issued upon exercise of an Option and
the taxes required to be withheld in connection with such exercise, a
commitment for the delivery to the Company of proceeds from the sale,
pursuant to a brokerage or similar arrangement approved in advance by the
Committee in its sole discretion, of Shares to be issued upon exercise of
the Option. The forms of consideration which will be accepted in payment of
the exercise price for an Option and related withholding taxes shall be
specified in the Option Agreement evidencing such Option, and the person or
persons entitled to exercise the Option shall be entitled to elect from
those so specified the form(s) to be used in effecting payment with respect
to a particular exercise; provided that any election by a Section 16 Person
to use already owned Shares or have Shares withheld from those issuable
upon such exercise shall be effective only if made in accordance with the
applicable requirements of Rule 16b-3; and provided further that a
commitment for the delivery to the Company of proceeds from the sale,
pursuant to a brokerage or similar arrangement, of Shares to be issued upon
exercise of an Option will not be accepted from a Section 16 Person if
under Securities Law Requirements such a sale would be matched with such
exercise to result in "shortswing" profit liability under Section 16(b) of
the Act on the part of such Section 16 Person with respect to such
transaction.
(b) WITHHOLDING TAX LOANS. In addition to any one or more of the
acceptable forms of consideration recited in Paragraph (a) of this Section
9 which the Committee may permit in the Option Agreement to be used for the
payment of withholding taxes, the Committee may determine in its discretion
at the time of grant of an Option to permit the Optionee (but not any
Successor) to, and if the Committee so determines, shall provide in the
Option Agreement evidencing such Option that such Optionee may, borrow from
the Company an amount sufficient to pay the taxes required to be withheld
in connection with the exercise of such an Option, with each such borrowing
to be evidenced by a promissory note of the Optionee payable to the order
of the Company. Except as may otherwise be specified by the Committee in
its sole discretion at the time of grant thereof and reflected in the
Option Agreement evidencing an Option, each such loan shall be for a term
of five (5) years at a rate of interest equal to the Company's then primary
domestic commercial lender's prime or base rate as in effect from time to
time, with payments of interest on such loan due quarterly and payments
toward the principal of such loan due, to the extent of the net proceeds
therefrom, within fifteen (15) days after any disposition by the Optionee
of any
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Shares acquired upon exercise of any stock option granted by the
Company to the Optionee pursuant to this Plan or otherwise (excluding any
disposition of such Shares by gift or to the Company in payment of the
exercise price of a stock option granted by the Company to the Optionee
pursuant to this Plan or otherwise and/or any related withholding taxes),
provided that the entire unpaid principal balance shall be due at the
earlier of (i) the expiration of the five (5) year term, or (ii) the
termination of the Optionee's Continuous Employment (other than by reason
of Optionee's "disability" (as defined in Section 10(d)) or "retirement"
(as defined in Section 10(e)).
(c) COMPANY WITHHOLDING OF TAXES. If, upon being notified by the
Company of the amount of the taxes required to be withheld in connection
with an exercise of an Option, the Optionee fails promptly to pay, or to
make arrangements acceptable to the Company for the payment of, such taxes,
the Company shall have the right to elect (but shall be under no
obligation) to cover such taxes through:
(i) withholding Shares from those issuable upon such exercise,
provided that any such election so to withhold Shares with respect to
the exercise of an Option by a Section 16 Person shall be effective only
if made in accordance with the applicable requirements of Rule 16b-3;
and/or
(ii) deducting such taxes from any amounts payable in cash to the
Optionee by the Company for any reason as of the time of such exercise
or any time thereafter.
(d) VALUATION OF SHARES DELIVERED OR WITHHELD. Where already owned
Shares, or Shares withheld from those issuable upon such exercise, are used
in payment of the exercise price and/or related withholding taxes, such
Shares shall be valued (i) with respect to the payment of the exercise
price, at Fair Market Value as of the day immediately preceding the date of
exercise and (ii) with respect to the payment of withholding taxes, at Fair
Market Value as of the day immediately preceding the date tax withholding
is required to be made.
(e) OPTIONEE CERTIFICATION OF ALREADY OWNED SHARES. Already owned
Shares which were acquired through a previous exercise of a stock option
granted to an Optionee by the Company pursuant to this Plan or otherwise
may be used in payment of the exercise price of an Option and/or related
withholding taxes only if the previous exercise through which such Shares
were acquired was made as of a date not less than six (6) months prior to
the date of the exercise of the Option in connection with which such Shares
are being tendered as payment. A tender of already owned Shares in payment
of the exercise price of an Option and/or related withholding taxes will
not be accepted by the Company unless accompanied by a written statement
signed by the person or persons entitled to exercise such Option certifying
that either (i) the Shares tendered in payment were acquired other than
through the exercise of a stock option granted by the Company or (ii) the
Shares tendered in payment were acquired through the exercise, on such
date(s) as shall be recited in such statement (which date(s) shall be not
less than six (6) months prior to the date of tender), of stock option(s)
granted by the Company.
(f) DELIVERY OF ALREADY OWNED SHARES. Where the person exercising an
Option elects to use already owned Shares in full or partial payment of the
exercise price and/or related withholding taxes, the Committee may, in its
sole discretion, accept, in lieu of physical delivery of the stock
certificates evidencing such Shares, such constructive delivery of such
Shares as may be satisfactory to the Committee.
10. METHOD OF EXERCISE.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Committee and as permitted under the Plan.
An Option may not be exercised for a fraction of a Share. In order to
exercise an Option, the person or persons entitled to exercise it shall
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deliver to the Company written notice of the number of shares with
respect to which the Option is being exercised, accompanied by payment in
full of the aggregate exercise price for the Shares so to be acquired. To
constitute an effective exercise of an Option, such notice and payment
shall be addressed to the attention of the Treasurer of the Company and
must be received at the principal executive office of the Company (i) with
respect to an Option that is terminated for "Misconduct" (as defined
below) pursuant to Paragraph (b) of this Section 10 or for "Prohibited
Conduct" (as defined in Section 16(a)) pursuant to Section 16(a), prior to
the time of the occurrence of the event constituting such Misconduct or
Prohibited Conduct or (ii) with respect to any other Option, by 5:00 p.m.,
local time, on the date of expiration or termination of the Option. Until
the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive
dividends nor any other rights as a stockholder shall exist with respect
to the Optioned Stock notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the stock certificate is issued, except as
provided in Section 12.
Exercise of an Option shall result in a decrease in the number of
Shares which thereafter shall be available for sale under such Option by
the number of Shares as to which the Option is exercised, including any
shares withheld from the Shares to be issued pursuant to such exercise to
cover the exercise price and/or related withholding taxes.
(b) TERMINATION OF EMPLOYMENT. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof and
reflected in the Option Agreement evidencing such Option, upon the
termination of an Optionee's Continuous Employment (other than by reason of
the Optionee's death, disability or retirement), he may exercise his Option
(to the extent that he was entitled to exercise it at the time of such
termination of employment) until the earlier of (i) the date thirty (30)
days (or such longer period of time as is determined by the Committee in
its sole discretion at the time of such termination of employment, provided
that if the Committee intends that a particular Option continue to qualify
as a Tax Qualified Option, the Committee will have to observe such
restrictions as may be imposed by applicable tax laws on the
post-termination period within which a Tax Qualified Option may be
exercised if it wishes to ensure that any post-termination exercise of such
Option is made only within the period permitted by such laws) after the
effective date of the termination of his employment or (ii) the expiration
date of such Option, and the Option shall terminate on the earlier of such
dates; provided, however, that if the Optionee is terminated by the Company
for Misconduct, then such Option shall terminate effective as of the time
of the conduct constituting such Misconduct. As used in this Plan,
"Misconduct: means that the Optionee has engaged in Prohibited Conduct,
committed an act of embezzlement, fraud or theft with respect to the
property or business of the Company or a Subsidiary or deliberately
disregarded the rules of the Company or a Subsidiary in such a manner as to
cause material loss, damage or injury to or otherwise endanger the
property, reputation, employees or business prospects of the Company or a
Subsidiary. The Committee shall determine whether an Optionee's employment
was terminated by reason of Misconduct. In making such determination, the
Committee may, but shall not be required to, give the Optionee an
opportunity to be heard and to present evidence on his behalf.
(c) DEATH OF OPTIONEE. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof and reflected
in the Option Agreement evidencing such Option, upon the death of an
Optionee:
(i) who is at the time of his death in the employ of the Company or
a Subsidiary and who shall have been in Continuous Employment since the
date of grant of the Option, the Option may be exercised (to the extent
the Optionee would have been entitled to do so had he continued living
and terminated employment six (6) months after the date of death) by his
Successor until the earlier of (A) the date six (6)
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months (or, if the Committee intends that a particular Option qualify
as a Tax Qualified Option, such lesser period of time within
which the applicable tax laws may require that the Option be exercised
in order for such Option so to qualify) following the date of the
Optionee's death or (B) the expiration date of such Option, and the
Option shall terminate on the earlier of such dates; or
(ii) within one (1) month after the termination of Continuous
Employment other than termination by the Company or a Subsidiary for
Misconduct or due to disability, the Option may be exercised (to the
extent the Optionee was entitled to do so at the date of termination of
Continuous Employment) by his Successor until the earlier of (A) the
date six (6) months following the date of the Optionee's death (or, if
the Committee intends that a particular Option qualify as a Tax
Qualified Option, such lesser period of time within which the applicable
tax laws may require that the Option be exercised in order for such
Option so to qualify) or (B) the expiration date of such Option, and the
Option shall terminate on the earlier of such dates.
(d) DISABILITY OF OPTIONEE. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof and
reflected in the Option Agreement evidencing such Option, if an Optionee's
Continuous Employment terminates due to his having become permanently and
totally disabled within the meaning of Section 22(e)(3) of the Code
("disability"), the Option may be exercised (to the extent the Optionee was
entitled to do so as of the effective date of the termination of his
employment by reason of such disability) until the earlier of (i) the date
one (1) year after the effective date of such termination of his employment
or (ii) the expiration date of such Option, and the Option shall terminate
on the earlier of such dates.
(e) RETIREMENT OF OPTIONEE. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof and
reflected in the Option Agreement evidencing such Option, if an Optionee's
Continuous Employment terminates by reason of (A) his retirement at any age
entitling him to benefits under the provisions of any retirement plan of
the Company or any Subsidiary in which such Optionee participates; or (B)
retirement at any time after attaining age 65 (whichever circumstance is
applicable constituting "retirement"), the Option may be exercised (to the
extent the Optionee shall be entitled to do so as of the effective date of
the termination of his employment by reason of such retirement) until the
earlier of (i) the date three (3) months after the effective date of the
termination of his employment or (ii) the expiration date of such Option,
and the Option shall terminate on the earlier of such dates.
11. NONTRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner by the Optionee
except at death by will or by the laws of descent and distribution and may be
exercised during the life of the Optionee only by the Optionee. No lien,
obligation or liability of an Optionee or a Successor shall attach to or
otherwise encumber the right and interest of such Optionee or Successor in and
to any Options outstanding under the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) ADJUSTMENTS, IN GENERAL. Subject to the provisions of Paragraph
(b) of this Section 12 and to any required action by the stockholders of
the Company, the number of Shares covered by each outstanding Option, and
the number of Shares which have been authorized for issuance under the Plan
but as to which no Options have yet been granted or which due to the
expiration, lapse, cancellation, surrender, forfeiture or other termination
of a stock option under this Plan or the Predecessor Plan are again
available for grant, as well as the price per Share covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding Shares resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of Shares or
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any other increase or decrease in the aggregate number of issued and
outstanding Shares effected without receipt of consideration by the
Company; provided, however, that the issuance of Shares pursuant to the
conversion or exchange of any securities of the Company convertible into
or exchangeable for Shares shall not be deemed to have been "effected
without receipt of consideration." Any fractional Shares which would
otherwise result from any such adjustments shall be eliminated either by
deleting all fractional Shares or by appropriate rounding to the next
higher (fractions of one-half or more) or lower (fractions of less than
one-half) whole Share. All such adjustments shall be made by the Board in
its sole discretion. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible
into or exchangeable for shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made to, the number of or
exercise price for Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, all outstanding Options will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Board. The Board may, in the exercise of its sole discretion in such
instances, declare that any Option shall terminate as of a date fixed by
the Board and give each Optionee the right to exercise his Option as to all
or any part of the Optioned Stock, including Shares as to which the Option
would not otherwise then be exercisable.
Subject to the provisions of Paragraph (b) of this Section 12, in the
event of a sale of all or substantially all of the assets of the Company,
or the merger or consolidation of the Company with or into another
corporation, each outstanding Option shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Board, in the exercise
of its sole discretion, determines that, in lieu of such assumption or
substitution, the Optionee shall have the right to exercise the Option as
to all or any part of the Optioned Stock, including Shares as to which the
Option would not otherwise then be exercisable. If in the event of a
merger, consolidation or sale of assets the Board makes an Option fully
exercisable in lieu of assumption or substitution, the Company shall notify
the Optionee that the Option shall be fully exercisable for a period of
thirty (30) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
(b) SPECIAL ADJUSTMENTS UPON CHANGE IN CONTROL. In the event of a
"Change in Control" of the Company (as defined in Paragraph (c) of this
Section 12), unless otherwise determined by the Board in its sole
discretion prior to the occurrence of such Change in Control, the following
acceleration and valuation provisions shall apply:
(i) Any Options outstanding as of the date of such Change in
Control that are not yet fully vested on such date shall become fully
vested; and
(ii) The value of all outstanding Options, measured by the excess
of the "Change in Control Price" (as defined in Paragraph (d) of this
Section 12) over the exercise price, shall be cashed out. The cash out
proceeds shall be paid to the Optionee or, in the event of death of an
Optionee prior to payment, to his Successor.
(c) DEFINITION OF "CHANGE IN CONTROL." For purposes of this Section
12, a "Change in Control" means the happening of any of the following:
(i) When any "person," as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company, a Subsidiary or a Company or
Subsidiary employee benefit plan, including any trustee of such a plan
acting as trustee) becomes the "beneficial owner" (as defined in Rule
13d-3 promulgated by the Commission under the Act, as adopted and
amended from time to time and as interpreted by formal or informal
opinions of, and releases published or other interpretive advice
provided by, the Staff of the Commission), directly or indirectly, of
securities of the Company
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representing fifty percent (50%) or more of the combined voting power
of the Company's then outstanding securities; or
(ii) The consummation of a transaction requiring stockholder
approval and involving the sale of all or substantially all of the
assets of the Company or the merger or consolidation of the Company with
or into another corporation.
(d) DEFINITION OF "CHANGE IN CONTROL PRICE." For purposes of this
Section 12, "Change in Control Price" shall be, as determined by the Board,
(i) the highest closing sale price of a Share, as reported by the NASDAQ
National Market System, any stock exchange on which the Shares are listed
or any other recognized securities market on which the Shares are traded,
at any time within the sixty (60) day period immediately preceding the date
of the Change in Control (the "Sixty-Day Period"), or (ii) the highest
price paid or offered, as determined by the Board, in any bona fide
transaction or bona fide offer related to the Change in Control, at any
time within the Sixty-Day Period.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date on which the Committee makes the determination granting
such Option. Notice of such determination shall be given to each Employee to
whom an Option is so granted within a reasonable time after the date of such
grant.
14. OPTION AGREEMENTS. As a condition to the effectiveness of each grant of
an Option (including, but not limited to, a Replenishment Option) under this
Plan, the Optionee shall enter into a written Option Agreement in such form as
may be authorized by the Committee from time to time. Subject to the provisions
of Section 20(a), each such Option Agreement shall contain such provisions as
are required by the terms of this Plan and may contain such additional
provisions not inconsistent with the terms of this Plan as the Committee in its
sole discretion may from time to time authorize. Each Option Agreement
evidencing an Option granted to a Section 16 Person shall also provide for such
minimum waiting period from the date of grant before the Option may be
exercised, and such minimum holding period from the date of the acquisition of
Shares upon exercise of an Option for which such Shares must be held before
making any disposition of such Shares, as may be required by Rule 16b-3.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
Securities Law Requirements and all other applicable provisions of law,
including, without limitation, any applicable state "blue sky" laws and foreign
(national and provincial) securities laws and the rules and regulations
promulgated under any of such laws, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option or the issuance of Shares upon
exercise of an Option, the Company may require the person exercising such Option
to make such representations and warranties to the Company as may be required,
in the opinion of counsel for the Company, by any of the aforementioned
Securities Law Requirements and other laws, which may include, without
limitation, representations and warranties that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares.
The Company shall not have any liability to any Optionee in respect of any
delay in the sale or issuance of Shares hereunder until the Company is able to
obtain authority from any governmental authority (domestic or foreign) or
self-regulatory organization having jurisdiction thereover, which authority is
deemed by the Company's counsel to be necessary to the lawful sale and issuance
of such Shares, or any failure to sell or issue such Shares as to which such
requisite authority the Company is unable to obtain.
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16. FORFEITURE OF OPTIONS AND REALIZED BENEFITS.
(a) LOSS OF UNEXERCISED OPTIONS. If an Optionee holding an outstanding
Option, without the written consent of the Company as authorized by the
Committee in its sole discretion, engages in any of the following conduct
(any such conduct being referred to as "Prohibited Conduct") at any time
during the period beginning on the date the Optionee first entered the
employ of the Company or a Subsidiary and continuing for so long as any
portion of such Option remains outstanding and unexercised (the "Grant
Period"):
(i) rendering services for any organization or engaging directly or
indirectly in any business which, in the sole judgment of the Committee,
is or becomes competitive with the Company or a Subsidiary, or where
such rendering of services or engaging in business, in the sole judgment
of the Committee, is or becomes otherwise prejudicial to or in conflict
with the interests of the Company or a Subsidiary; provided that the
ownership of a not more than ten percent (10%) equity interest in any
organization or business whose equity is listed on a recognized
securities exchange or traded over-the-counter shall not constitute
Prohibited Conduct within the meaning of this Subparagraph (i);
(ii) disclosing to anyone outside the company or any Subsidiary, or
use in other than the business of the Company or any Subsidiary, any
confidential or proprietary information relating to the business of the
Company or any Subsidiary, acquired by the Optionee either during or
after employment with the Company or a Subsidiary;
(iii) except as may otherwise be permitted by any agreement
otherwise made by the Company or a Subsidiary with the Optionee, failing
to disclose fully and promptly in writing and assign to the Company or
to the Subsidiary by which the Optionee is or was employed all right,
title and interest in any discovery, invention, process, method,
improvement or idea, whether or not patentable or subject to copyright
protection and whether or not reduced to tangible form or reduced to
practice, made or conceived by such person during employment by the
Company or such Subsidiary, relating in any manner to the actual or
contemplated business, research or development work of the Company or
such Subsidiary or to do anything reasonably necessary to enable the
Company or such Subsidiary to secure a patent, copyright or similar
protection in the United States of America and/or in foreign countries
as the Company or such Subsidiary may elect; or
(iv) inducing or attempting to induce any customer or supplier of
the Company or a Subsidiary to breach any contract with the Company or a
Subsidiary or otherwise terminate its relationship with the Company or a
Subsidiary; then the Committee shall have the right, upon determining
that the Optionee has engaged in any Prohibited Conduct at any time
during the Grant Period (in making such determination, the Committee
may, but shall not be required to, give the Optionee an opportunity to
be heard and to present evidence on his behalf), to declare the Option
forfeited and cancelled effective as of the time of the conduct
constituting such Prohibited Conduct.
(b) OPTIONEE CERTIFICATION UPON EXERCISE. Each time an Optionee
exercises an Option, the Optionee shall be deemed to certify to the Company
that such Optionee did not, without the written consent of the Company as
authorized by the Committee in its sole discretion, engage in any
Prohibited Conduct at any time during the period beginning on the date the
Optionee first entered the employ of the Company or a Subsidiary and ending
on the date of such exercise (the "Pre-Exercise Period").
(c) LOSS OF REALIZED BENEFITS. In the event that the Committee
determines with respect to a particular exercise of an Option that the
Optionee engaged in any Prohibited Conduct at any time during the
Pre-Exercise Period or within one (1) year after such exercise (in making
such determination, the Committee may, but shall not be required to, give
the
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Optionee an opportunity to be heard and to present evidence on his
behalf), such Optionee shall be liable to the Company (i) to the extent
such Optionee has, prior to his receipt of the "Forfeiture Notice" (as
defined below), disposed of the Shares acquired through such exercise, for
payment to the Company of an amount in cash equal to the excess of (A) the
net cash proceeds from such disposition (or if such Shares were disposed
of other than for cash, the aggregate Fair Market Value of such Shares as
of the date of disposition) over (B) that portion of the sum of the cash
and the aggregate Fair Market Value as of the exercise date of any already
owned Shares used by the Optionee to pay the exercise price for such
Shares (such sum being referred to as the "Exercise Payment") which is
allocable to the Shares disposed of in the portion that such number of
Shares bears to the total number of Shares issued pursuant to such Option
exercise and (ii) to the extent such Optionee still owns at the time he
receives the Forfeiture Notice the Shares acquired through such exercise,
at the option of the Committee, either (A) for the return of such Shares
to the Company in exchange for a cash refund from the Company to such
Optionee in an amount equal to that portion of the Exercise Payment which
is allocable to the Shares still owned in the proportion that such number
of Shares bears to the total number of Shares issued pursuant to such
Option exercise (such portion being referred to as the "Retained Shares
Exercise Payment") or (B) for payment to the Company of an amount in cash
equal to the excess of the aggregate Fair Market Value as of the exercise
date of the Shares still owned over the Retained Shares Exercise Payment.
To enforce such liability against such Optionee, the Committee shall
notify the Optionee thereof in writing within three (3) years of the date
of the affected Option exercise, which notice (the "Forfeiture Notice")
shall include a statement of the form of payment which the Committee has
elected to receive from the Optionee with respect to Shares still owned by
the Optionee. Within ten (10) days after receiving the Forfeiture Notice,
the Optionee shall make full payment of such liability to the Company in
cash, or to the extent such Optionee still owns Shares acquired through
the affected exercise and the Committee elects in the Forfeiture Notice to
receive such Shares, stock certificates evidencing such Shares still owned
by the Optionee (duly endorsed for transfer with signature guaranteed). In
the event that the Committee elects to receive, and the Optionee returns,
Shares, the Company shall make the refund payment required to be made to
the Optionee with respect to such Shares upon the Company's receipt of
such Shares as hereinabove required.
(d) CUMULATIVE RIGHTS. The obligation of an Optionee under this
Section 16 to refrain from Prohibited Conduct is in addition to, and does
not in any way supersede or diminish, any other obligation of such Optionee
with respect to such matters which such Optionee may owe to the Company,
any Subsidiary or any other person under any agreement, applicable law or
otherwise (a "Similar Obligation"). Any action taken by the Company or the
Committee to enforce, compromise, settle or waive the provisions of this
Section 16 with respect to any particular event constituting Prohibited
Conduct shall not in any way affect the rights of the Company, the
Committee, any Subsidiary or any person against an Optionee with respect to
any other event constituting Prohibited Conduct or any Similar Obligation,
nor shall any action taken or failed to be taken by the Company, any
Subsidiary or any other person against an Optionee to enforce, compromise,
settle or waive any Similar Obligation have any effect on the rights of the
Company and the Committee under this Section 16.
17. RESERVATION OF SHARES. The Company, during the term of this Plan, shall
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. EFFECTIVENESS OF PLAN. This Plan was adopted by the Board on, and shall
be effective as of, August 27, 1990; provided, however, that any Options granted
hereunder shall not be exercisable unless and until, and this Plan and all such
Options shall automatically
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terminate if, the Plan is not approved, within one (1) year of the date of
adoption of the Plan, by the holders of the outstanding Shares of the Company
present and voting, in person or by proxy, at a duly held meeting of the
Company's stockholders or any adjournment thereof and by such percentage of such
quorum of such stockholders as may be required by applicable Securities Law
Requirements. Once so approved by the stockholders of the Company, the Plan
shall continue in full force and effect until (i) terminated by resolution of
the Board or (ii) both (A) all Options granted under the Plan have been
exercised in full and (B) no Authorized Shares remain available for the granting
of additional Options. The termination of the Plan shall not affect Options
already granted, which Options shall remain in full force and effect in
accordance with their respective terms as if this Plan had not been terminated.
19. AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board may, in its sole
discretion, amend the Plan from time to time, provided that any amendment which
Rule 16b-3 or any other Securities Law Requirement requires be approved by the
stockholders of the Company shall be made only with the approval of such
stockholders. Amendments to the Plan shall apply prospectively to all Options
then outstanding under the Plan, except in the case of any amendment which is
adverse to an Optionee, in which case the amendment shall apply with respect to
the outstanding Options held by the adversely affected Optionee only upon the
consent of such Optionee to such amendment. In exercising its authority under
Section 4(b)(vi) to amend outstanding Options, the Committee likewise may make
an amendment which adversely affects the Optionee only upon the consent of such
Optionee to such amendment. Notwithstanding the provisions of this Section 19,
the consent of the Optionee shall not be required with respect to an amendment
to the Plan or to any outstanding Option which is made in order to comply with
Securities Law Requirements or which causes a Tax Qualified Option no longer to
qualify as such.
20. GENERAL PROVISIONS.
(a) GRANTS TO FOREIGN EMPLOYEES. Notwithstanding any other provision
of this Plan to the contrary but subject to applicable Securities Law
Requirements and tax laws, to the extent deemed necessary or appropriate by
the Committee in its sole discretion in order to further the purposes of
the Plan with respect to Employees who are foreign nationals and/or
employed outside the United States of America, an Option granted to any
such Employee may be on terms and conditions different from those specified
in this Plan in recognition of the differences in the laws, tax policies
and customs applicable to such an Employee, without the necessity of the
Plan being amended to provide for such different terms and conditions.
(b) NATURE OF BENEFITS. Benefits realized by an Optionee under this
Plan or any Option granted hereunder shall not be deemed a part of such
Optionee's regular, recurring compensation for purposes of the termination,
indemnity or severance pay law of any country and shall not be included in,
nor have any effect on, the determination of benefits under any other
employee benefit plan or similar arrangement provided to such Optionee by
the Company or a Subsidiary unless expressly so provided by such other plan
or arrangement, or except where the Committee expressly determines in its
sole discretion that an Option or portion thereof should be so included in
order accurately to reflect competitive compensation practices or to
recognize that an Option has been granted in lieu of a portion of
competitive annual cash compensation.
(c) DETERMINATION OF DEADLINES. If any day on or before which action
under this Plan or any Option granted hereunder must be taken falls on a
Saturday, Sunday or Company-recognized holiday, such action may be taken on
the next succeeding day which is not a Saturday, Sunday or
Company-recognized holiday; provided, however, that the provisions of this
Paragraph (c) shall not apply to, and shall not extend the time for
exercise of, any
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Option which is terminated for Misconduct pursuant to Section 10(b) or
for Prohibited Conduct pursuant to Section 16(a).
(d) GOVERNING LAW. To the extent that federal laws (such as the Act or
the Code) or the Delaware General Corporation Law do not otherwise control,
this Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Ohio and construed
accordingly.
(e) GENDER AND NUMBER. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural
and vice versa.
(f) CAPTIONS. The captions contained in this Plan are for convenience
of reference only and do not affect the meaning of any term or provision
hereof.
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EXHIBIT 10.1.4
TELXON CORPORATION
1990 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
AS AMENDED
1. PURPOSE OF THE PLAN. The purpose of this Plan is to promote the best
interests of the Company and its stockholders by enabling the Company to attract
and retain the services of experienced and knowledgeable independent directors
by providing such directors the opportunity, pursuant to Options granted under
the Plan, to acquire a proprietary interest in the Company and thereby encourage
them to put forth their maximum efforts for the continued success and growth of
the Company.
2. DEFINITIONS. In addition to such other capitalized terms as are defined
elsewhere in this Plan, the following terms shall when used in this Plan have
the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended from
time to time.
(b) "Authorized Shares" means the maximum aggregate number of shares
of Common Stock specified in Section 4(a) as being authorized for issuance
and sale under Options granted pursuant to the Plan, subject to adjustment
thereof in accordance with Section 12 of the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Commission" means the United States Securities and Exchange
Commission.
(f) "Committee" means the Committee appointed by the Board in
accordance with Paragraph (a) of Section 5 of the Plan, if a Committee is
appointed. The members of such Committee shall be members of the Board. If
no Committee has been appointed, any reference to the "Committee" shall be
deemed a reference to the "Board."
(g) "Common Stock" means the Common Stock, par value $.01 per share,
of the Company.
(h) "Company" means Telxon Corporation, a Delaware corporation.
(i) "Director" means any person elected or duly appointed in
accordance with the certificate of incorporation or by-laws of the Company,
or applicable law, to serve on the Board.
(j) "Employee" means any person, including officers and Directors who
are also officers, employed by the Company or any Subsidiary. The payment
of director's fees by the Company shall not be sufficient to constitute a
person as an "Employee" of the Company.
(k) "Option" means a right granted to a non-Employee Director pursuant
to the Plan to purchase a specified number of shares of Common Stock at a
specified price during a specified period and on such other terms and
conditions as may be specified pursuant to the Plan. Options may be granted
as Tax Qualified Options or as Options which do not qualify as Tax
Qualified Options.
(l) "Option Agreement" means the written agreement evidencing an
Option by and between the Company and the Optionee as required by Section
14.
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(m) "Optioned Stock" means the Common Stock subject to an Option.
(n) "Optionee" means a non-Employee Director who receives an Option.
(o) "Plan" means this Telxon Corporation 1990 Stock Option Plan for
Non-Employee Directors.
(p) "Rule 16b-3" means Rule 16b-3 promulgated by the Commission under
the Act or any similar successor regulation exempting certain transactions
involving stock-based compensation arrangements from the liability
provisions of Section 16 of the Act, as adopted and amended from time to
time and as interpreted by formal or informal opinions of, and releases
published or other interpretive advice provided by, the Staff of the
Commission.
(q) "Securities Law Requirements" means the Act and the rules and
regulations promulgated by the Commission thereunder, as adopted and
amended from time to time, including but not limited to Rule 16b-3, and as
interpreted by formal or informal opinions of, and releases published or
other interpretive advice provided by, the Staff of the Commission, and the
requirements of any stock exchange, automated inter-dealer quotation system
or other recognized securities market on which the Common Stock is listed
or traded or in which the Common Stock is included, as adopted and amended
from time to time and as interpreted by formal or informal opinions of, and
other interpretive advice provided by, the representatives of such stock
exchange, quotation system or other securities market.
(r) "Shares" means the Common Stock as adjusted in accordance with
Section 12 of the Plan.
(s) "Subsidiary" means a corporation of which not less than fifty
percent (50%) of the voting shares are owned by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(t) "Successor" means the estate of an Optionee or a person who
succeeds by will or the laws of descent and distribution to an Optionee's
right to exercise an Option.
(u) "Tax Qualified Option" means an Option which is intended at the
time of grant to qualify for special tax treatment under Section 422A or
other particular provisions of the Code and the regulations, rulings and
procedures promulgated, published or otherwise provided thereunder, as
adopted and amended from time to time.
3. QUALIFICATION OF PLAN. The Plan is intended to qualify for an exemption
from the operation of Section 16(b) of the Act, pursuant to Rule 16b-3. Further,
the Plan is structured to comply with the requirements of Rule 16b-3(c)(2)(ii)
regarding disinterested administration and formula awards to ensure that
directors receiving grants under the Plan continue to be "disinterested
persons," as that term is defined in Rule 16b-3(c)(2)(i), for the purpose of
administering the Company's employee stock option plans.
4. STOCK SUBJECT TO THE PLAN.
(a) NUMBER OF SHARES ISSUABLE. Subject to adjustment in accordance
with the provisions of Section 12 of the Plan, the maximum aggregate number
of Authorized Shares which may be issued and sold under Options granted
pursuant to the Plan is 250,000 shares of Common Stock. The Shares issued
and sold upon the exercise of Options may be treasury Shares, Shares of
original issue or a combination thereof.
(b) COMPUTATION OF SHARES AVAILABLE FOR GRANT. For purposes of
computing the number of Authorized Shares available from time to time under
the Plan for the grant of Options, the number of Shares subject to each
Option granted pursuant to the Plan shall be provisionally counted against
the Authorized Shares from and after the grant of such Option but only for
so long as and to the extent that such Option shall remain outstanding
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<PAGE> 3
and unexercised. Upon the exercise, in whole or in part, of an Option,
the number of Shares issued upon such exercise shall be permanently
deducted from the Authorized Shares, provided that no such permanent
deduction shall be made, and the provisional deduction against the
Authorized Shares shall be reversed, to the extent that the exercise price
and/or the withholding taxes with respect to such exercise are paid
through the delivery to the Company by the person exercising the Option of
Shares already owned by such person and/or through the withholding by the
Company of Shares from the total number of Shares with respect to which
the Option is exercised. The provisional deduction against the Authorized
Shares shall likewise be reversed to the extent of the unexercised portion
of an Option upon the expiration, lapse, cancellation, surrender,
forfeiture or other termination of such Option. The Shares covered by any
such reversal of a provisional deduction against the Authorized Shares
shall immediately become available for the granting of new Options under
the Plan with respect thereto.
5. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board or the
Board may, in its discretion, appoint a Committee to administer the Plan
subject to such terms and conditions as the Board may prescribe; provided
that the terms upon which, including the time or times at or within which,
and the price or prices at which Shares may be purchased upon the exercise
of Options shall be approved or ratified by such action of the Board or a
committee duly designated by the Board from its members as may be required
by the Delaware General Corporation Law, as amended from time to time; and
provided further, that neither the Board nor any such Committee shall make
any decision concerning the Plan with respect to any Optionee unless the
Board or such Committee making such decision is constituted so that such
decision complies with the applicable requirements of Rule 16b-3. Once
appointed, the Committee shall continue to serve until otherwise directed
by the Board. From time to time the Board may increase the size of the
Committee and may appoint additional members thereof, remove members (with
or without cause), fill vacancies however caused and remove all members of
the Committee and thereafter directly administer the Plan.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of this Plan,
the Committee shall have the authority, in its sole discretion:
(i) To determine, upon review of relevant information in accordance
with Section 8(b) of the Plan, the "Fair Market Value" (as defined in
said Section 8(b)) of the Shares;
(ii) To determine the terms and provisions of each Option (which
terms and provisions need not be identical), including, but not limited
to, the exercise price per Share, subject to the provisions of Section 8
of the Plan.
(iii) To amend any outstanding Option, subject to the provisions of
Section 18 of the Plan;
(iv) To authorize any person to prepare and execute on behalf of
the Company any instrument deemed by the Committee to be necessary or
advisable to evidence or effectuate the Plan, any Option granted
thereunder or any amendment to the Plan or any Option;
(v) To interpret the Plan;
(vi) To prescribe, amend and rescind, if deemed necessary or
appropriate, rules and regulations relating to the Plan, to the extent
not inconsistent with the Plan; and
(vii) To make all other determinations the Committee may deem
necessary or advisable in connection with the administration of the
Plan.
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(viii) To accelerate the time as of which any Option shall vest and
may be exercised by the Optionee; provided, however, that the Optionee
shall not participate in any decision regarding acceleration of vesting
of any Option held by him or her.
(c) EFFECT OF BOARD AND COMMITTEE DECISIONS. All decisions,
determinations and actions of the Board and the Committee in connection
with the construction, interpretation, administration, application,
operation and implementation of the Plan shall be final, conclusive and
binding on the Company, its stockholders and Subsidiaries, all Employees
and Optionees and the respective legal representatives, heirs, successors
and assigns of all of the foregoing and all other persons claiming under or
through any of them.
(d) EXCULPATION AND INDEMNIFICATION. No member of the Board or the
Committee, and no Employee or other agent acting on behalf of the Board or
the Committee, shall be personally liable for any decision, determination
or action made or taken, or failed to be made or taken, with respect to
this Plan or any Option granted hereunder, and the Company shall fully
protect each such person in respect of any such decision, determination or
action and shall indemnify each such person against any and all claims,
losses, damages, expenses and liabilities arising from or in connection
with any such decision, determination or action.
6. ELIGIBILITY; FORMULA GRANTS.
(a) ELIGIBILITY. Each Director who is not an Employee shall be
eligible to receive grants of Options under the Plan.
(b) FORMULA GRANTS.
(i) INITIAL GRANTS. Each eligible director who is newly elected or
appointed to the Board after May 19, 1992 shall automatically be granted
an option (the "Initial Grant") to purchase 25,000 Shares of Common
Stock (subject to adjustment as provided in Section 12) on the day he or
she joins the Board.
(ii) CONTINUING GRANTS. Each non-Employee Director shall
automatically be granted an Option (the "Continuing Grant") to purchase
10,000 Shares of Common Stock (subject to adjustment as provided in
Section 12) on each anniversary of his or her election or last
re-election to the Board so long as such Director is serving on the
Board on the date of such anniversary.
7. TERM OF OPTIONS; VESTING.
(a) TERM OF OPTIONS. The term of each Option shall be seven (7) years
from the date of grant thereof, provided that the Committee, if it intends
that a particular Option qualify as a Tax Qualified Option, shall observe
such restrictions on the term of such Option as may be imposed by
applicable tax laws in order for such Option so to qualify. Each Option
shall continue in effect in accordance with its terms notwithstanding that
the Plan may be terminated prior to the expiration of the term of such
Option.
(a) VESTING.
(i) INITIAL GRANTS. Each Option constituting an Initial Grant shall
be exercisable as to one-third of the Shares subject to the Option after
the first anniversary of the grant date, exercisable as to two-thirds of
the Shares subject to the Option after the second anniversary of the
grant date, and exercisable as to all or any part of the Shares subject
to the Option after the third anniversary of the grant date.
(ii) CONTINUING GRANTS. Each Option constituting a Continuing Grant
shall be exercisable as to all or any part of the Shares subject to the
Option after the third anniversary of the grant date.
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8. EXERCISE PRICE.
(a) MINIMUM PRICE REQUIRED. The per Share exercise price for the
Shares subject to an Option shall be such price as is determined by the
Committee at the time of grant of an Option and reflected in the Option
Agreement evidencing the same; provided that in no event shall such
exercise price per Share be less than the Fair Market Value per Share as of
the day prior to the date of grant of such Option.
(b) DEFINITION OF "FAIR MARKET VALUE." For all purposes under the
Plan, "Fair Market Value" per Share shall be determined by the Committee in
its sole discretion; provided that if the Shares are included in the NASDAQ
National Market System or listed on a stock exchange on the date as of
which the same is to be determined, the Fair Market Value per Share shall
be the closing price on such quotation system or exchange which is the
principal trading market for the Shares on the date of determination or, if
no sale price was reported for the Shares on the date of determination, the
closing price on such principal trading market for the last trading day
prior to the date of determination for which a sale price was reported;
provided further, however, that if the foregoing method of determining Fair
Market Value is inconsistent with the then existing tax law requirements
with respect to any Option which the Committee intends to qualify as a Tax
Qualified Option, then the Fair Market Value per Share shall be determined
by the Committee in such manner as is required for such Tax Qualified
Option to qualify as such.
9. FORM OF PAYMENT.
(a) ACCEPTABLE FORMS OF CONSIDERATION. Except as may otherwise be
specified by the Committee in its sole discretion at the time of grant
thereof and reflected in the Option Agreement evidencing such Option, the
following forms of consideration will be accepted in payment of the
exercise price for the Shares to be issued upon exercise of an Option: (i)
cash, (ii) personal check, (iii) bank cashier's check, (iv) already owned
Shares (duly endorsed for transfer with signature guaranteed), or (v) any
combination of the foregoing. In addition to the acceptable forms of
consideration hereinabove recited in this Paragraph (a), the Committee may
determine in its sole discretion at the time of grant of an Option, and if
the Committee so determines, shall provide in the Option Agreement
evidencing such Option, that one or both of the following additional forms
of consideration will be accepted, either alone or in any combination with
any of the other acceptable forms of consideration recited in this
Paragraph (a), in payment of the exercise price for the Shares to be issued
upon exercise of an Option, (vi) Shares withheld from the Shares to be
issued upon such exercise, and/or (vii) subject to compliance with
applicable law, a commitment for the delivery to the Company of proceeds
from the sale, pursuant to a brokerage or similar arrangement approved in
advance by the Committee in its sole discretion, of Shares to be issued
upon exercise of the Option. The forms of consideration which will be
accepted in payment of the exercise price for an Option shall be specified
in the Option Agreement evidencing such Option, and the person or persons
entitled to exercise the Option shall be entitled to elect from those so
specified the form(s) to be used in effecting payment with respect to a
particular exercise; provided that any election by an Optionee to use
already owned Shares or have Shares withheld from those issuable upon such
exercise shall be effective only if made in accordance with the applicable
requirements of Rule 16b-3; and provided further that a commitment for the
delivery to the Company of proceeds from the sale, pursuant to a brokerage
or similar arrangement, of Shares to be issued upon exercise of an Option
will not be accepted from an Optionee if under Securities Law Requirements
such a sale would be matched with such exercise to result in "short-swing"
profit liability under Section 16(b) of the Act on the part of such
Optionee with respect to such transaction.
(b) VALUATION OF SHARES DELIVERED OR WITHHELD. Where already owned
Shares, or Shares withheld from those issuable upon such exercise, are used
in payment of the exercise
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<PAGE> 6
price, such Shares shall be valued at Fair Market Value as of the day
immediately preceding the date of exercise.
(c) DELIVERY OF ALREADY OWNED SHARES. Where the person exercising an
Option elects to use already owned Shares in full or partial payment of the
exercise price, the Committee may, in its sole discretion, accept, in lieu
of physical delivery of the stock certificates evidencing such Shares, such
constructive delivery of such Shares as may be satisfactory to the
Committee.
10. METHOD OF EXERCISE.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Committee and as permitted under the Plan.
An Option may not be exercised for a fraction of a Share. In order to
exercise an Option, the person or persons entitled to exercise it shall
deliver to the Company written notice of the number of Shares with respect
to which the Option is being exercised, accompanied by payment in full of
the aggregate price for the Shares so to be acquired. To constitute an
effective exercise of an Option, such notice and payment shall be addressed
to the attention of the Treasurer of the Company and must be received at
the principal executive office of the Company by 5:00 p.m., local time, on
the date of expiration or termination of the Option. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends nor any other
rights as a stockholder shall exist with respect to the Optioned Stock
notwithstanding the exercise of the Option. No adjustment will be made for
a dividend or other right for which the record date is prior to the date
the stock certificate is issued, except as provided in Section 12.
Exercise of an Option shall result in a decrease in the number of Shares
which thereafter shall be available for sale under such Option by the
number of Shares as to which the Option is exercised, including any Shares
withheld from the Shares to be issued pursuant to such exercise to cover
the exercise price.
(b) TERMINATION OF SERVICE. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof and
reflected in the Option Agreement evidencing such Option, in the event that
an Optionee shall cease to be a Director (other than by reason of the
Optionee's death or disability), he may exercise his Option (to the extent
that he was entitled to exercise it at the time he ceased to be a Director)
until the earlier of (i) the date three (3) months after the date Optionee
ceased to be a Director or (ii) the expiration date of such Option, and the
Option shall terminate on the earlier of such dates.
(c) DEATH OF OPTIONEE. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof and reflected
in the Option Agreement evidencing such Option, upon the death of an
Optionee:
(i) who is at the time of his death a Director of the Company, the
Option may be exercised (to the extent the Optionee would have been
entitled to do so had he continued living and terminated his
directorship six (6) months after the date of death) by his Successor
until the earlier of (A) the date six (6) months (or, if the Committee
intends that a particular Option qualify as a Tax Qualified Option, such
lesser period of time within which the applicable tax laws may require
that the Option be exercised in order for such Option so to qualify)
following the date of the Optionee's death or (B) the expiration date of
such Option, and the Option shall terminate on the earlier of such
dates; or
6
<PAGE> 7
(ii) within thirty (30) days after the termination of Optionee's
directorship (other than termination due to disability), the Option may
be exercised (to the extent the Optionee was entitled to do so at the
date of termination of his directorship by his Successor until the
earlier of (A) the date six (6) months following the date of the
Optionee's death (or, if the Committee intends that a particular Option
qualify as a Tax Qualified Option, such lesser period of time within
which the applicable tax laws may require that the Option be exercised
in order for such Option so to qualify) or (B) the expiration date of
such Option, and the Option shall terminate on the earlier of such
dates.
(d) DISABILITY OF OPTIONEE. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof and
reflected in the Option Agreement evidencing such Option, if an Optionee's
directorship terminates due to Optionee having become permanently and
totally disabled within the meaning of Section 23(e)(3), of the Code
("disability"), the Option may be exercised (to the extent the Optionee was
entitled to do so as of the effective date of the termination of Optionee's
directorship by reason of such disability) until the earlier of (i) the
date one (1) year after the effective date of such termination or (ii) the
expiration date of such Option, and the Option shall terminate on the
earlier of such dates.
11. NONTRANSFERABILITY OF OPTIONS. Options granted under the Plan may not
be sold, pledged, assigned, hypothecated, disposed of or otherwise transferred
in any manner by the Optionee other than by will or the laws of descent and
distribution or pursuant to a "qualified domestic relations" order (as defined
by the Code) or Title I of the Employee Retirement Income Securities Act, or the
rules thereunder. The designation of a beneficiary by an Optionee shall not be
deemed to constitute a transferee. No lien, obligation or liability of an
Optionee or a Successor shall attach to or otherwise encumber the right and
interest of such Optionee or Successor in and to any Options outstanding under
the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) ADJUSTMENTS, IN GENERAL. Subject to the provisions of Paragraph
(b) of this Section 12 and to any required action by the stockholders of
the Company, the number of Shares covered by each outstanding Option, and
the number of Shares which have been authorized for issuance under the Plan
but as to which no Options have yet been granted or which due to the
expiration, lapse, cancellation, surrender, forfeiture or other termination
of an Option under this Plan are again available for grant, as well as the
price per Share covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued and outstanding Shares resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of Shares or any
other increase or decrease in the aggregate number of issued and
outstanding Shares effected without receipt of consideration by the
Company; provided, however, that the issuance of Shares pursuant to the
conversion or exchange of any securities of the Company convertible into or
exchangeable for Shares shall not be deemed to have been "effected without
receipt of consideration." Any fractional Shares which would otherwise
result from any such adjustments shall be eliminated either by deleting all
fractional Shares or by appropriate rounding to the next higher (fractions
of one-half or more) or lower (fractions of less than one-half) whole
Share. All such adjustments shall be made by the Board in its sole
discretion. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into or
exchangeable for shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made to, the number of or exercise
price for Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, all
outstanding Options will terminate immediately prior to the consummation of
such proposed action,
7
<PAGE> 8
unless otherwise provided by the Board. The Board may, in the exercise of
its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right
to exercise his Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise then be
exercisable.
Subject to the provisions of Paragraph (b) of this Section 12, in the event
of a sale of all or substantially all of the assets of the Company, or the
merger or consolidation of the Company with or into another corporation,
each outstanding Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board, in the exercise of its sole
discretion, determines that, in lieu of such assumption or substitution,
the Optionee shall have the right to exercise the Option as to all or any
part of the Optioned Stock, including Shares as to which the Option would
not otherwise then be exercisable. If in the event of a merger,
consolidation or sale of assets the Board makes an Option fully exercisable
in lieu of assumption or substitution, the Company shall notify the
Optionee that the Option shall be fully exercisable for a period of thirty
(30) days from the date of such notice, and the Option will terminate upon
the expiration of such period.
(b) SPECIAL ADJUSTMENTS UPON CHANGE IN CONTROL. In the event of a
"Change in Control" of the Company (as defined in Paragraph (c) of this
Section 12), unless otherwise determined by the Board in its sole
discretion prior to the occurrence of such Change in Control, the following
acceleration and valuation provisions shall apply:
(i) Any Options outstanding as of the date of such Change in
Control that are not yet fully vested on such date shall become fully
vested; and
(ii) The value of all outstanding Options, measured by the excess
of the "Change in Control Price" (as defined in Paragraph (d) of this
Section 12) over the exercise price, shall be cashed out. The cash out
proceeds shall be paid to the Optionee or, in the event of death of an
Optionee prior to payment, to his Successor.
(c) DEFINITION OF "CHANGE IN CONTROL." For purposes of this Section
12, a "Change in Control" means the happening of any of the following:
(i) When any "person," as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company, a Subsidiary or a Company or
Subsidiary employee benefit plan, including any trustee of such a plan
acting as trustee) becomes the "beneficial owner" (as defined in Rule
13d-3 promulgated by the Commission under the Act, as adopted and
amended from time to time and as interpreted by formal or informal
opinions of, and releases published or other interpretive advice
provided by, the Staff of the Commission), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of
the combined voting power of the Company's then outstanding securities;
or
(ii) The consummation of a transaction requiring stockholder
approval and involving the sale of all or substantially all of the
assets of the Company or the merger or consolidation of the Company with
or into another corporation.
(d) DEFINITION OF "CHANGE IN CONTROL PRICE." For purposes of this
Section 12, "Change in Control Price" shall be, as determined by the Board,
(i) the highest closing sale price of a Share, as reported by the NASDAQ
National Market System, any stock exchange on which the Shares are listed
or any other recognized securities market on which the Shares are traded,
at any time within the sixty (60) day period immediately preceding the date
of the Change in Control (the "Sixty-Day Period"), or (ii) the highest
price paid or offered, as determined by members of the Board other than the
Optionees, in any bona fide transaction or bona fide offer, related to the
Change in Control, at any time within the Sixty-Day Period.
8
<PAGE> 9
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date on which the Committee makes the determination granting
such Option. Notice of such determination shall be given to each Director to
whom an Option is so granted within a reasonable time after the date of such
grant.
14. OPTION AGREEMENTS. As a condition to the effectiveness of each grant of
an Option under this Plan, the Optionee shall enter into a written Option
Agreement in such form as may be authorized by the Committee from time to time.
Subject to the provisions of Section 19(a), each such Option Agreement shall
contain such provisions as are required by the terms of this Plan and may
contain such additional provisions not inconsistent with the terms of this Plan
as the Committee in its sole discretion may from time to time authorize. Each
Option Agreement evidencing an Option granted to a Director shall also provide
for such minimum waiting period from the date of grant before the Option may be
exercised, and such minimum holding period from the date of the acquisition of
Shares upon exercise of an Option for which such Shares must be held before
making any disposition of such Shares, as may be required by Rule 16b-3.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
Securities Law Requirements and all other applicable provisions of law,
including without limitation, any applicable state "blue sky" laws and foreign
(national and provincial) securities laws and the rules and regulations
promulgated under any of such laws, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option or the issuance of Shares upon
exercise of an Option, the Company may require the person exercising such Option
to make such representations and warranties to the Company as may be required,
in the opinion of counsel for the Company, by any of the aforementioned
Securities Law Requirements and other laws, which may include, without
limitation, representations and warranties that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares.
The Company shall not have any liability to any Optionee in respect of any
delay in the sale or issuance of shares hereunder until the Company is able to
obtain authority from any governmental authority (domestic or foreign) or
self-regulatory organization having jurisdiction thereover, which authority is
deemed by the Company's counsel to be necessary to the lawful sale and issuance
of such Shares, or any failure to sell or issue such Shares as to which such
requisite authority the Company is unable to obtain.
16. RESERVATION OF SHARES. The Company, during the term of this Plan, shall
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. EFFECTIVENESS OF PLAN. This Plan was adopted by the Board on, and shall
be effective as of, October 18, 1990; provided however, that any Options granted
hereunder shall not be exercisable unless and until, and this Plan and all such
Options shall automatically terminate if, the Plan is not approved, within one
(1) year of the date of adoption of the Plan, by the holders of the outstanding
Shares of the Company present and voting, in person or by proxy, at a duly held
meeting of the Company's stockholders or any adjournment thereof and by such
percentage of such quorum of such stockholders as may be required by applicable
Securities Law Requirements. Once so approved by the stockholders of the
Company, the Plan shall continue in full force and effect until (i) terminated
by resolution of the Board or (ii) both (A) all Options granted under the Plan
have been exercised in full and (B) no Authorized Shares remain available for
the granting of additional Options. The termination of the Plan shall
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<PAGE> 10
not affect Options already granted, which Options shall remain in full force and
effect in accordance with their respective terms as if this Plan had not been
terminated.
18. AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board may, in its sole
discretion, amend the Plan from time to time, provided that any amendment which
Rule 16b-3 or any other Securities Law Requirement requires be approved by the
stockholders of the Company shall be made only with the approval of such
stockholders. Amendments to the Plan shall apply prospectively to all Options
then outstanding under the Plan, except in the case of any amendment which is
adverse to an Optionee, in which case the amendment shall apply with respect to
the outstanding Options held by the adversely affected Optionee only upon the
consent of such Optionee to such amendment. In exercising its authority under
Section 5(b)(vii) to amend outstanding Options, the Committee likewise may make
an amendment which adversely affects the Optionee only upon the consent of such
Optionee to such amendment. Notwithstanding the provisions of this Section 18,
the consent of the Optionee shall not be required with respect to an amendment
to the Plan or to any outstanding Option which is made in order to comply with
Securities Law Requirements or which causes a Tax Qualified Option no longer to
qualify as such. Notwithstanding the foregoing, the provisions of Sections 6, 7
and 8 shall not be amended more than once every six months, other than as
required to comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
19. GENERAL PROVISIONS.
(a) GRANTS TO FOREIGN DIRECTORS. Notwithstanding any other provision
of this Plan to the contrary but subject to applicable Securities Law
Requirements and tax laws, to the extent deemed necessary or appropriate by
the Committee in its sole discretion in order to further the purposes of
the Plan with respect to Directors who are foreign nationals and/or
employed outside the United States of America, an Option granted to any
such Director may be on terms and conditions different from those specified
in this Plan in recognition of the differences in the laws, tax policies
and customs applicable to such a Director, without the necessity of the
Plan being amended to provide for such different terms and conditions.
(b) DETERMINATION OF DEADLINES. If any day on or before which action
under this Plan or any Option granted hereunder must be taken falls on a
Saturday, Sunday or Company-recognized holiday, such action may be taken on
the next succeeding day which is not a Saturday, Sunday or
Company-recognized holiday.
(c) GOVERNING LAW. To the extent that federal laws (such as the Act or
the Code) or the Delaware General Corporation Law do not otherwise control,
this Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Ohio and construed
accordingly.
(d) GENDER AND NUMBER. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural
and vice versa.
(e) CAPTIONS. The captions contained in this Plan are for convenience
of reference only and do not affect the meaning of any term or provision
hereof.
(f) Transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Securities
Exchange Act of 1934. To the extent that any provision of the Plan or
action by the Committee fails to so comply, such provision or action shall
be deemed null and void to the extent permitted by law and deemed advisable
by the Committee.
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<PAGE> 1
Exhibit 10.1.5
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
Dan R. Wipff - Grant Number 1538
THIS AGREEMENT made as of the 17th day of October, 1988, between
TELXON CORPORATION, a Delaware corporation (the "Corporation"), and DAN R.
WIPFF, an independent Director of the Corporation (the "Optionee").
WHEREAS, on the date hereof (the "Grant Date"), a non-qualified stock
option for the purchase of shares of common stock, par value $.01 per
share, of the Corporation ("Common Stock") was granted to Optionee by the
Corporation's Board of Directors in order to provide the Optionee with
additional incentive to promote the interests of the Corporation;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
have agreed, and do hereby agree, as follows:
1. GRANT OF OPTION.
---------------
Under Grant Number 1538, the Corporation has granted to the Optionee
the right and option (the "Option") to purchase all or any part of an
aggregate of 6,000 shares of Common Stock, such number of shares being
subject to adjustment as provided herein (as so adjusted, the "Shares").
2. OPTION PRICE.
------------
The option price of the Shares covered by the Option is $14.625 per
share, such price being subject to adjustment as provided herein (as so
adjusted, the "Option Price").
<PAGE> 2
3. TERM OF OPTION.
--------------
(a) The term of the Option shall be for a period commencing on the
Grant Date and ending on the fifth (5th) anniversary of the Grant Date (the
"Expiration Date"), subject to earlier termination as provided herein.
(b) Prior to its expiration or termination, the Option may be
exercised, in whole or in part, for such number of the Shares as the
Optionee may from time to time elect, in accordance with the following
limitations:
(i) From and after the Grant Date, it may be exercised
as to one-third (1/3) of the Shares, subject to the provisions
of Section 13 hereof.
(ii) After the first (1st) anniversary of the Grant
Date, it may be exercised as to two-thirds (2/3) of the Shares,
less such number of the Shares as to which the Option has
theretofore been exercised.
(iii) After the second (2nd) anniversary of the Grant
Date, it may be exercised as to any part or all of the Shares,
less such number of the Shares as to which the Option has
theretofore been exercised.
(c) Shares shall not be issued with respect to the Option unless
the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, the Securities
Exchange Act of 1934 (the "Exchange Act"), the rules and regulations
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<PAGE> 3
promulgated thereunder, any applicable state "blue sky" laws, and the
requirements of any inter-dealer quotation system or stock exchange upon
which the Shares may then be included or listed, and shall be further
subject to the approval of counsel for the Corporation with respect to such
compliance.
As a condition to the exercise of the Option or the issuance of the
Shares on exercise of the Option, the Corporation may require the person
exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Corporation, such a representation is required
by any of the aforementioned laws.
Inability of the Corporation to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Corporation's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Corporation of any liability in respect of the
failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
(d) Nothing in this Agreement shall confer upon the Optionee any
right to continue to be a Director of the Corporation.
4. EXERCISE OF OPTION.
------------------
(a) In order to exercise the Option, the person or persons entitled
to exercise it shall deliver to the Corporation written notice of the
number of Shares with respect to which the Option is to be exercised,
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<PAGE> 4
accompanied by payment in full of the Option Price for the Shares being
purchased. No fractional shares will be issued. The payment of the Option
Price shall be either in cash, or through delivery to the Corporation of
shares of Common Stock evidenced by negotiable certificates registered in
the sole name of the Optionee, or by any combination of cash and such
shares.
(b) The value of shares delivered for payment of the Option Price
shall be the fair market value of such shares at the time the Option is
exercised. For purposes of this Agreement, the "fair market value" of a
share of Common Stock shall be the closing price on the last trading day
preceding the date of determination for which a sale price was reported on
the NASDAQ National Market System or on a stock exchange on which the
Common Stock is then listed (or for the next preceding day within thirty
(30) days prior to the date of determination on which sales occurred). In
the event no such quotations are available, the other members of the
Corporation's Board of Directors shall use any reasonable valuation method,
as determined in their sole discretion. If certificates representing
shares of Common Stock are used to pay all or part of the Option Price, the
Corporation shall cause two certificates to be delivered to the Optionee,
one certificate representing the number of shares, if any, represented by
the certificates delivered by Optionee for use in payment of the Option
Price in excess of the number of shares represented thereby necessary,
valued as hereinabove provided, to pay the portion of the Option Price not
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<PAGE> 5
paid in cash, and a separate certificate representing the number of shares
with respect to which the Optionee exercised the Option.
(c) Until the issuance (as evidenced by the appropriate entry on
the books of the Corporation or of a duly authorized transfer agent of the
Corporation) of the stock certificate evidencing such Shares, no right to
vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Shares notwithstanding the exercise of the Option.
Except as otherwise provided in this Agreement, no adjustment will be made
for a dividend or other right for which the record date is prior to the
date the stock certificate is issued.
5. NONTRANSFERABILITY.
------------------
The Option shall not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws
of descent and distribution, and the Option may be exercised, during the
lifetime of the Optionee, only by his.
6. TERMINATION OF DIRECTORSHIP.
---------------------------
In the event that the Optionee shall cease to be a Director of the
Corporation (otherwise than by reason of the Optionee's death or
disability), the Option may be exercised (to the extent the Optionee shall
have been entitled to do so as of the date he ceases to be a Director)
until the earlier of (i) the date three (3) months after the date the
Optionee ceases to be a Director and (ii) the Expiration Date, and the
Option shall terminate on the earlier of such dates.
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<PAGE> 6
7. DISABILITY OF OPTIONEE.
----------------------
In the event that the Optionee shall cease to be a Director of the
Corporation as a result of his having become "disabled" (as determined by
the other members of the Corporation's Board of Directors in their sole and
absolute discretion), the Option may be exercised (to the extent the
Optionee shall have been entitled to do so as of the date he ceases to be a
Director on account of his becoming so disabled) until the earlier of (i)
the date one (1) year after the date he ceases to be a Director and (ii)
the Expiration Date, and the Option shall terminate on the earlier of such
dates.
8. DEATH OF OPTIONEE.
-----------------
(a) In the event of the death of the Optionee at a time when he is
a Director of the Corporation, the Option may be exercised (to the extent
the Optionee would have been entitled to do so had he continued living and
terminated his Directorship six (6) months after the date of his death) by
the Optionee's estate or by a person who acquires the right to exercise the
Option by bequest or inheritance until the earlier of (i) the date six (6)
months following the date of the Optionee's death or (ii) the Expiration
Date, and the Option shall terminate on the earlier of such dates.
(b) In the event of the Death of the Optionee within thirty (30)
days after the termination of his Directorship other than on account of his
becoming disabled, the Option may be exercised (to the extent the Optionee
would have been entitled to do so at the date of termination of his
Directorship) by the Optionee's estate or by a person who acquires the
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<PAGE> 7
right to exercise the Option by bequest or inheritance until the earlier of
(i) the date six (6) months following the date of the Optionee's death or
(ii) the Expiration Date, and the Option shall terminate on the earlier of
such dates.
9. TAXES.
-----
(a) The Corporation shall have the right to deduct any taxes
required by law to be withheld in connection with the exercise of the
Option from any amounts payable in cash to the Optionee at the time of any
exercise or any time thereafter. The Corporation shall also have the right
to require a person entitled to receive Shares pursuant to the exercise of
the Option to pay to the Corporation the amount of any taxes which the
Corporation is or will be required to withhold with respect to the exercise
of the Option before the certificate for such Shares is delivered to him.
(b) The Optionee shall have the right to borrow from the
Corporation an amount sufficient to pay the income tax liability resulting
from the exercise of the Option. Such loan shall be for a term of five (5)
years at a rate of interest equal to the Corporation's then primary
commercial lender's prime or base rate as in effect from time to time.
Payments of interest on such loan shall be made quarterly and the principal
shall be repaid at the earlier of the expiration of the five (5) year term
or a disposition of any of the Shares acquired upon exercise of the Option.
10. CHANGES IN CAPITAL STRUCTURE.
----------------------------
(a) Subject to the provisions of Section 10(b) hereof and to any
required action by the stockholders of the Corporation, the number of
-7-
<PAGE> 8
Shares covered by the Option, and the Option Price, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the aggregate number of issued shares
of Common Stock effected without receipt of consideration by the
Corporation; provided, however, that conversion of any convertible
securities of the Corporation shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
other members of the Corporation's Board of Directors, whose determination
in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of the Shares subject to the Option.
In the event of the proposed dissolution or liquidation of the
Corporation, the Option will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
other members of the Corporation's Board of Directors. The other members
of the Corporation's Board of Directors may, in the exercise of their sole
discretion in such instances, declare that the Option shall terminate as of
a date fixed by them and give the Optionee the right to exercise the Option
as to all or any part of the Shares, including Shares as to which the
Option would not otherwise be exercisable.
-8-
<PAGE> 9
Subject to the provisions of Section 10(b) hereof, in the event of a
proposed sale of all or substantially all of the assets of the Corporation,
or the merger or consolidation of the Corporation with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the other members of the Corporation's Board
of Directors determine, in the exercise of their sole discretion and in
lieu of such assumption or substitution, that the Optionee shall have the
right to exercise the Option as to all Shares, including Shares as to which
the Option would not otherwise be exercisable. If, in the event of a
merger, consolidation or sale of assets, the other members of the
Corporation's Board of Directors make the Option fully exercisable in lieu
of assumption or substitution, the Corporation shall notify the Optionee
that the Option shall be fully exercisable for a period of thirty (30) days
from the date of such notice, and the Option will terminate upon the
expiration of such period.
(b) In the event of a "Change in Control" of the Corporation, as
defined in Section 10(c) below, unless otherwise determined by the other
members of the Corporation's Board of Directors prior to the occurrence of
such Change in Control, the following acceleration and valuation provisions
shall apply:
(i) As of the date of such Change in Control, the Option
shall become fully exercisable and vested as to all of the Shares;
and
-9-
<PAGE> 10
(ii) The value of the Option, measured by the excess of the
Change in Control Price (as hereinafter defined) over the Option
Price, shall, unless otherwise determined by the other members of the
Corporation's Board of Directors, be cashed out. The cash out
proceeds shall be paid to the Optionee or, in the event of death of
the Optionee prior to payment, to the estate of the Optionee or to a
person who acquires the right to exercise the Option by bequest or
inheritance.
(c) For purposes of this Section 10, a "Change in Control" means
the happening of any of the following:
(i) When any "person", as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Corporation, a
Subsidiary or a Corporation or Subsidiary employee benefit plan,
including any trustee of such plan acting as trustee) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing
fifty percent (50%) or more of the combined voting power of the
Corporation's then outstanding securities; or
(ii) The consummation of a transaction requiring stockholder
approval, and involving the sale of all or substantially all of the
assets of the Corporation or the merger or consolidation of the
Corporation with or into another corporation.
(d) For purposes of this Section 10, "Change in Control Price"
shall be, as determined by the other members of the Corporation's Board of
-10-
<PAGE> 11
Directors, (i) the highest closing sale price of a share of Common Stock as
reported by the NASDAQ National Market System (or, if the Common Stock is
listed on a stock exchange, the highest closing price on such exchange as
reported by such exchange), at any time within the sixty (60) day period
immediately preceding the date of the Change in Control (the "Sixty-Day
Period"), or (ii) the highest price paid or offered, as determined by the
other members of the Corporation's Board of Directors, in any bona fide
transaction or bona fide offer related to the Change in Control of the
Corporation, at any time within the Sixty-Day Period.
11. ACCELERATION OF OPTION.
----------------------
The other members of the Corporation's Board of Directors may, with
the consent of the Optionee, if the Option is not then immediately
exercisable in full, accelerate the time or times at which the Option may
be exercised to any earlier time or times.
12. RESERVATION OF SHARES.
---------------------
The Corporation, during the term of the Option, shall at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of this Agreement.
13. STOCKHOLDER APPROVAL.
--------------------
The Option shall be submitted to the Corporation's stockholders for
their approval at the 1989 Annual Meeting of such stockholders in order
that the Option qualify for certain protections from the "short-swing
profit" liability provisions of the Exchange Act available under Securities
and Exchange Commission regulations. Notwithstanding anything in this
-11-
<PAGE> 12
Agreement to the contrary, the Option shall not be exercisable, in whole or
in part, unless and until it has been approved by the Corporation's
stockholders.
14. COUNTERPARTS.
------------
This Agreement may be executed by the parties hereto in several
counterparts, each of which when so executed shall be an original, but all
of such counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed by a duly authorized officer, and the Optionee has hereunto
set his hand, all as of the day and year first above written.
TELXON CORPORATION
By: /s/ Raymond D. Meyo
-----------------------
Its: President
-----------------------
/s/ Dan R. Wipff
---------------------------
Dan R. Wipff
12
<PAGE> 1
Exhibit 10.1.6
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
Raj Reddy - Grant Number 1539
THIS AGREEMENT made as of the 17th day of October, 1988, between
TELXON CORPORATlON, a Delaware corporation (the "Corporation"), and RAJ
REDDY, an independent Director of the Corporation (the "Optionee").
WHEREAS, on the date hereof (the "Grant Date"), a non-qualified stock
option for the purchase of shares of common stock, par value $.01 per
share, of the Corporation ("Common Stock") was granted to Optionee by the
Corporation's Board of Directors in order to provide the Optionee with
additional incentive to promote the interests of the Corporation;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
have agreed, and do hereby agree, as follows:
1. GRANT OF OPTION.
---------------
Under Grant Number 1539, the Corporation has granted to the Optionee
the right and option (the "Option") to purchase all or any part of an
aggregate of 6,000 shares of Common Stock, such number of shares being
subject to adjustment as provided herein (as so adjusted, the "Shares").
2. OPTION PRICE.
------------
The option price of the Shares covered by the Option is $14.625 per
share, such price being subject to adjustment as provided herein (as so
adjusted, the "Option Price").
<PAGE> 2
3. TERM OF OPTION.
--------------
(a) The term of the Option shall be for a period commencing on the
Grant Date and ending on the fifth (5th) anniversary of the Grant Date (the
"Expiration Date"), subject to earlier termination as provided herein.
(b) Prior to its expiration or termination, the Option may be
exercised, in whole or in part, for such number of the Shares as the
Optionee may from time to time elect, in accordance with the following
limitations:
(i) From and after the Grant Date, it may be exercised
as to one-third (1/3) of the Shares, subject to the provisions
of Section 13 hereof.
(ii) After the first (lst) anniversary of the Grant Date, it may
be exercised as to two-thirds (2/3) of the Shares, less such number of
the Shares as to which the Option has theretofore been exercised.
(iii) After the second (2nd) anniversary of the Grant Date, it may
be exercised as to any part or all of the Shares, less such number of the
Shares as to which the Option has theretofore been exercised.
(c) Shares shall not be issued with respect to the Option unless the
exercise of such Option and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, the Securities Exchange Act of 1934
(the "Exchange Act"), the rules and regulations
-2-
<PAGE> 3
promulgated thereunder, any applicable state "blue sky" laws, and the
requirements of any inter-dealer quotation system or stock exchange upon
which the Shares may then be included or listed, and shall be further
subject to the approval of counsel for the Corporation with respect to such
compliance.
As a condition to the exercise of the Option or the issuance of the
Shares on exercise of the Option, the Corporation may require the person
exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Corporation, such a representation is required
by any of the aforementioned laws.
Inability of the Corporation to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Corporation's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Corporation of any liability in respect of the
failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
(d) Nothing in this Agreement shall confer upon the Optionee any
right to continue to be a Director of the Corporation.
4. EXERCISE OF OPTION.
------------------
(a) In order to exercise the Option, the person or persons entitled
to exercise it shall deliver to the Corporation written notice of the
number of Shares with respect to which the Option is to be exercised,
-3-
<PAGE> 4
accompanied by payment in full of the Option Price for the Shares being
purchased. No fractional shares will be issued. The payment of the Option
Price shall be either in cash, or through delivery to the Corporation of
shares of Common Stock evidenced by negotiable certificates registered in
the sole name of the Optionee, or by any combination of cash and such
shares.
(b) The value of shares delivered for payment of the Option Price
shall be the fair market value of such shares at the time the Option is
exercised. For purposes of this Agreement, the "fair market value" of a
share of Common Stock shall be the closing price on the last trading day
preceding the date of determination for which a sale price was reported on
the NASDAQ National Market System or on a stock exchange on which the
Common Stock is then listed (or for the next preceding day within thirty
(30) days prior to the date of determination on which sales occurred). In
the event no such quotations are available, the other members of the
Corporation's Board of Directors shall use any reasonable valuation method,
as determined in their sole discretion. If certificates representing
shares of Common Stock are used to pay all or part of the Option Price, the
Corporation shall cause two certificates to be delivered to the Optionee,
one certificate representing the number of shares, if any, represented by
the certificates delivered by Optionee for use in payment of the Option
Price in excess of the number of shares represented thereby necessary,
valued as hereinabove provided, to pay the portion of the Option Price not
-4-
<PAGE> 5
paid in cash, and a separate certificate representing the number of shares
with respect to which the Optionee exercised the Option.
(c) Until the issuance (as evidenced by the appropriate entry on
the books of the Corporation or of a duly authorized transfer agent of the
Corporation) of the stock certificate evidencing such Shares, no right to
vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Shares notwithstanding the exercise of the Option.
Except as otherwise provided in this Agreement, no adjustment will be made
for a dividend or other right for which the record date is prior to the
date the stock certificate is issued.
5. NONTRANSFERABILITY.
------------------
The Option shall not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws
of descent and distribution, and the Option may be exercised, during the
lifetime of the Optionee, only by him.
6. TERMINATION OF DIRECTORSHIP.
---------------------------
In the event that the Optionee shall cease to be a Director of the
Corporation (otherwise than by reason of the Optionee's death or
disability), the Option may be exercised (to the extent the Optionee shall
have been entitled to do so as of the date he ceases to be a Director)
until the earlier of (i) the date three (3) months after the date the
Optionee ceases to be a Director and (ii) the Expiration Date, and the
Option shall terminate on the earlier of such dates.
-5-
<PAGE> 6
7. DISABILITY OF OPTIONEE.
----------------------
In the event that the Optionee shall cease to be a Director of the
Corporation as a result of his having become "disabled" (as determined by
the other members of the Corporation's Board of Directors in their sole and
absolute discretion), the Option may be exercised (to the extent the
Optionee shall have been entitled to do so as of the date he ceases to be a
Director on account of his becoming so disabled) until the earlier of (i)
the date one (1) year after the date he ceases to be a Director and (ii)
the Expiration Date, and the Option shall terminate on the earlier of such
dates.
8. DEATH OF OPTIONEE.
-----------------
(a) In the event of the death of the Optionee at a time when he is
a Director of the Corporation, the Option may be exercised (to the extent
the Optionee would have been entitled to do so had he continued living and
terminated his Directorship six (6) months after the date of his death) by
the Optionee's estate or by a person who acquires the right to exercise the
Option by bequest or inheritance until the earlier of (i) the date six (6)
months following the date of the Optionee's death or (ii) the Expiration
Date, and the Option shall terminate on the earlier of such dates.
(b) In the event of the Death of the Optionee within thirty (30)
days after the termination of his Directorship other than on account of his
becoming disabled, the Option may be exercised (to the extent the Optionee
would have been entitled to do so at the date of termination of his
Oirectorship) by the Optionee's estate or by a person who acquires the
-6-
<PAGE> 7
right to exercise the Option by bequest or inheritance until the earlier of
(i) the date six (6) months following the date of the Optionee's death or
(ii) the Expiration Date, and the Option shall terminate on the earlier of
such dates.
9. TAXES.
-----
(a) The Corporation shall have the right to deduct any taxes
required by law to be withheld in connection with the exercise of the
Option from any amounts payable in cash to the Optionee at the time of any
exercise or any time thereafter. The Corporation shall also have the right
to require a person entitled to receive Shares pursuant to the exercise of
the Option to pay to the Corporation the amount of any taxes which the
Corporation is or will be required to withhold with respect to the exercise
of the Option before the certificate for such Shares is delivered to him.
(b) The Optionee shall have the right to borrow from the
Corporation an amount sufficient to pay the income tax liability resulting
from the exercise of the Option. Such loan shall be for a term of five (5)
years at a rate of interest equal to the Corporation's then primary
commercial lender's prime or base rate as in effect from time to time.
Payments of interest on such loan shall be made quarterly and the principal
shall be repaid at the earlier of the expiration of the five (5) year term
or a disposition of any of the Shares acquired upon exercise of the Option.
10. CHANGES IN CAPITAL STRUCTURE.
----------------------------
(a) Subject to the provisions of Section 10(b) hereof and to any
required action by the stockholders of the Corporation, the number of
-7-
<PAGE> 8
Shares covered by the Option, and the Option Price, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the aggregate number of issued shares
of Common Stock effected without receipt of consideration by the
Corporation; provided, however, that conversion of any convertible
securities of the Corporation shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
other members of the Corporation's Board of Directors, whose determination
in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of the Shares subject to the Option.
In the event of the proposed dissolution or liquidation of the
Corporation, the Option will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
other members of the Corporation's Board of Directors. The other members
of the Corporation's Board of Directors may, in the exercise of their sole
discretion in such instances, declare that the Option shall terminate as of
a date fixed by them and give the Optionee the right to exercise the Option
as to all or any part of the Shares, including Shares as to which the
Option would not otherwise be exercisable.
-8-
<PAGE> 9
Subject to the provisions of Section 10(b) hereof, in the event of a
proposed sale of all or substantially all of the assets of the Corporation, or
the merger or consolidation of the Corporation with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the other members of the Corporation's Board of
Directors determine, in the exercise of their sole discretion and in lieu of
such assumption or substitution, that the Optionee shall have the right to
exercise the Option as to all Shares, including Shares as to which the Option
would not otherwise be exercisable. If, in the event of a merger,
consolidation or sale of assets, the other members of the Corporation's Board
of Directors make the Option fully exercisable in lieu of assumption or
substitution, the Corporation shall notify the Optionee that the Option shall
be fully exercisable for a period of thirty (30) days from the date of such
notice, and the Option will terminate upon the expiration of such period.
(b) In the event of a "Change in Control" of the Corporation, as
defined in Section 10(c) below, unless otherwise determined by the other
members of the Corporation's Board of Directors prior to the occurrence of
such Change in Control, the following acceleration and valuation provisions
shall apply:
(i) As of the date of such Change in Control, the Option
shall become fully exercisable and vested as to all of the Shares;
and
-9-
<PAGE> 10
(ii) The value of the Option, measured by the excess of the
Change in Control Price (as hereinafter defined) over the Option
Price, shall, unless otherwise determined by the other members of the
Corporation's Board of Directors, be cashed out. The cash out
proceeds shall be paid to the Optionee or, in the event of death of
the Optionee prior to payment, to the estate of the Optionee or to a
person who acquires the right to exercise the Option by bequest or
inheritance.
(c) For purposes of this Section 10, a "Change in Control" means
the happening of any of the following:
(i) When any "person", as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Corporation, a
Subsidiary or a Corporation or Subsidiary employee benefit plan,
including any trustee of such plan acting as trustee) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing
fifty percent (50%) or more of the combined voting power of the
Corporation's then outstanding securities; or
(ii) The consummation of a transaction requiring stockholder
approval, and involving the sale of all or substantially all of the
assets of the Corporation or the merger or consolidation of the
Corporation with or into another corporation.
(d) For purposes of this Section 10, "Change in Control Price"
shall be, as determined by the other members of the Corporation's Board of
-10-
<PAGE> 11
Directors, (i) the highest closing sale price of a share of Common Stock as
reported by the NASDAQ National Market System (or, if the Common Stock is
listed on a stock exchange, the highest closing price on such exchange as
reported by such exchange), at any time within the sixty (60) day period
immediately preceding the date of the Change in Control (the "Sixty-Day
Period"), or (ii) the highest price paid or offered, as determined by the
other members of the Corporation's Board of Directors, in any bona fide
transaction or bona fide offer related to the Change in Control of the
Corporation, at any time within the Sixty-Day Period.
11. ACCELERATION OF OPTION.
----------------------
The other members of the Corporation's Board of Directors may, with
the consent of the Optionee, if the Option is not then immediately
exercisable in full, accelerate the time or times at which the Option may
be exercised to any earlier time or times.
12. RESERVATION OF SHARES.
---------------------
The Corporation, during the term of the Option, shall at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of this Agreement.
13. STOCKHOLDER APPROVAL.
--------------------
The Option shall be submitted to the Corporation's stockholders for
their approval at the 1989 Annual Meeting of such stockholders in order
that the Option qualify for certain protections from the "short-swing
profit" liability provisions of the Exchange Act available under Securities
and Exchange Commission regulations. Notwithstanding anything in this
-11-
<PAGE> 12
Agreement to the contrary, the Option shall not be exercisable, in whole or
in part, unless and until it has been approved by the Corporation,s
stockholders.
14. COUNTERPARTS.
------------
This Agreement may be executed by the parties hereto in several
counterparts, each of which when so executed shall be an original, but all
of such counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed by a duly authorized officer, and the Optionee has hereunto
set his hand, all as of the day and year first above written.
TELXON CORPORATION
By: /s/ Raymond D. Meyo
----------------------
Its: President
---------------------
/s/ Raj Reddy
--------------------------
Raj Reddy
-12-
<PAGE> 1
EXHIBIT 10.1.11
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT (this "Agreement") is executed this _______ day of
May, 1993, at Akron, Ohio, by and between TELXON CORPORATION, a Delaware
corporation with offices at 3330 West Market Street, Akron, Ohio 44333
("Telxon"), and JOHN H. CRIBB of Poole Dorset, England ("Employee") and is made
effective April 1, 1993 (the "Effective Date").
WITNESSETH:
WHEREAS, Telxon desires to employ Employee initially as President,
International, and thereafter, in such capacity as the Board of Directors of
Telxon (the "Board") shall direct, and Employee desires to be so employed, upon
the terms and conditions herein contained; and
WHEREAS, Telxon and Employee desire to have this Agreement supersede
any and all prior agreements, oral or written, relating to the employment of
Employee by Telxon;
NOW, THEREFORE, in consideration of the foregoing and in consideration
of the mutual promises and agreements contained herein, the parties hereto
agree as follows:
1. EMPLOYMENT PERIOD. Telxon agrees to employ Employee and
Employee agrees to serve Telxon for a period (the "Employment Period")
beginning on April 1, 1993 and ending on March 31, 1995, subject to prior
termination of this Agreement pursuant to Paragraph 4 hereof.
2. NATURE OF DUTIES.
(a) Employee's duties and responsibilities shall be to serve in such
capacity as the Board shall direct, in conformity with management policies,
guidelines and directions issued by Telxon, and shall have general charge and
supervision of those functions and such other responsibilities as the Board
shall determine. Employee shall report directly to Telxon's President or such
other officer as the Board shall direct (the "Supervisor").
(b) Employee shall work exclusively for Telxon on a full-time basis
in such capacity and shall carry on his employment at the principal corporate
offices of Telxon in the United Kingdom or at such other location as shall be
required by Telxon, except for time spent traveling on business on behalf of
Telxon. During normal business hours, Employee shall devote all of his time
and attention to Telxon's business.
<PAGE> 2
(c) Employee shall perform his duties and responsibilities hereunder
diligently, faithfully and loyally in order to cause the proper, efficient and
successful operation of Telxon's business.
3. COMPENSATION AND EMPLOYMENT BENEFITS DURING THE TERM OF EMPLOY.
(a) BASE SALARY AND EXPENSES. As compensation for Employee's
services, Telxon shall pay to Employee a salary (the "Base Salary") at the
annual rate of Two Hundred Seventy Thousand United States Dollars ($270,000)
during the first full year of the Employment Period, and at the annual rate of
Three Hundred Fifteen Thousand United States Dollars ($315,000) during the
second full year of the Employment Period, payable in equal installments every
second Friday, or at such other interval as the Board shall direct. Telxon
shall reimburse Employee for all reasonable out-of-pocket expenses incurred by
Employee on Telxon's behalf during the Employment Period and approved by the
Supervisor, or such other officer as the Board shall direct.
(b) INCENTIVE COMPENSATION. In addition to the Base Salary,
Employee shall be eligible for incentive compensation (the "Incentive
Compensation") during the Employment Period. The Incentive Compensation shall
be (i) for the period beginning April 1, 1993 and ending March 31, 1994, 8.5%
(or such other percentage as the parties shall agree upon in the event that any
significant change is made by Telxon from its current method of allocating
intercompany costs and expenses or determining transfer prices) of the portion
of the Consolidated International Operating Income (as defined below) which
exceeds Four Million United States Dollars ($4,000,000), and (ii) for the
period beginning April 1, 1994 and ending March 31, 1995, a reasonable amount
to be determined by Telxon in connection with its compilation of Telxon's
budget for the 1995 fiscal year. For purposes of this Paragraph 3(b),
"Consolidated International Operating Income" means the combined operating
income, calculated in accordance with generally accepted accounting principles,
of the Telxon subsidiaries and branch offices listed below, as well as the
operating income of Telxon attributed to sales outside the United States and
Canada that are made by distributors of Telxon products; provided, however,
that Consolidated International Operating Income does not include any operating
results attributed to any merger or acquisition of another entity, or of
substantially all of the assets of another entity, outside of the United States
and Canada.
International Subsidiaries and Branch Offices
---------------------------------------------
Telxon Australia Pty., Ltd.
NV Telxon Belgium SA
Telxon France SA
Telxon mde GMBH
Telxon Italia SRL
Telxon Japan
Telxon Limited
Telxon Belgium (Branch)
Telxon Singapore (Branch)
2
<PAGE> 3
(c) BONUS COMPENSATION. In addition to the Base Salary and
Incentive Compensation, Employee shall be eligible for bonus compensation
("Bonus Compensation") during the Employment Period in an amount not to exceed
Seventy-Nine Thousand United States Dollars ($79,000), the actual amount of
which, if any, shall be determined in the sole discretion of the Board, subject
to the approval of the Supervisor.
Bonus Compensation shall be earned and shall accrue at, and
Employee shall have no entitlement thereto prior to, the end of Telxon's fiscal
year to which such Bonus Compensation relates. The Bonus Compensation, if any,
during the Employment Period that shall have been earned and accrued shall be
payable within thirty (30) days after completion of the year-end audit of
Telxon with respect to such fiscal year.
(d) PENSION. Telxon agrees to make pension payments to Employee's
designated retirement account annually in the amount of Sixty-Eight Thousand
United States Dollars ($68,000), commencing as of September 1, 1993 and
continuing so long as Employee remains employed by Telxon.
(e) VACATION. During the Employment Period, Employee shall be
entitled to take vacation in accordance with Telxon policy and, specifically,
thirty (30) working days per year. In the event that all or any part of said
vacation is not taken for any reason during any such year, there will be no
compensation paid in lieu thereof, but accrued and unused vacation time shall
be carried over and added to the vacation time for the succeeding year in
accordance with Telxon policy.
(f) HEALTH, DISABILITY, RETIREMENT AND DEATH BENEFITS. Telxon shall
provide Employee with the same health, disability, retirement, death and other
fringe benefits as are generally provided to the executive employees of Telxon
in accordance with such terms, conditions and eligibility requirements as may
from time to time be established or modified by Telxon and, specifically, (i)
the full cost (not to exceed Eight Hundred Four English Pounds Sterling (L.804)
per year) of the health plan provided to United Kingdom employees, on behalf of
Employee and his dependent children; and (ii) the premium for the sixteen (16)
year term, Two Hundred Forty Thousand Three Hundred Seventeen English Pounds
Sterling (L.240,317) life insurance policy currently in effect.
(g) AUTOMOBILE. Telxon shall provide Employee with an automobile
during the Employment Period similar in size and style to the automobile
Employee currently uses, and Telxon shall be responsible to pay all expenses,
including all operating and maintenance costs.
3
<PAGE> 4
(h) EXPENSE ACCOUNT. Employee shall also be entitled to an annual
expense allowance of Ten Thousand Six Hundred Sixty-Six English Pounds Sterling
(L.10,666).
(i) PAYMENTS. Telxon, in its sole discretion, may pay the amounts
required to be paid to Employee pursuant to this Paragraph 3 directly, or may
cause such payments to be made to Employee by any subsidiary or affiliate of
Telxon.
4. TERMINATION.
(a) This Agreement shall terminate automatically upon Employee's
death.
(b) Telxon may terminate Employee's employment under this
Agreement at any time, other than for cause, or if Employee becomes permanently
disabled, upon written notice to Employee given not less than five (5) days
prior to the date of termination (the "Termination Date") or such other minimum
notice period as may be required under laws of United Kingdom. Permanent
disability shall be determined by Telxon according to the same standards
applicable to the employees of Telxon generally under the disability benefits
referred to in Paragraph 3(f) hereof.
(c) Telxon shall have the right to terminate Employee's employment
under this Agreement at any time, immediately, for "cause," which shall mean
for behavior of Employee which is adverse to Telxon's interests, including,
without limitation, Employee's dishonesty, willful misconduct, disloyalty, acts
of bad faith, neglect of duty or material breach of this Agreement.
5. EFFECTS OF TERMINATION.
(a) In the event of automatic termination by reason of Employee's
death pursuant to Paragraph 4(a), or by Telxon by reason of Employee's
permanent disability pursuant to Paragraph 4(b), all of Telxon's obligations
under this Agreement shall end except for Telxon's obligations (i) to pay
Employee's Base Salary and Incentive Compensation, if any, in each case earned
and accrued but unpaid to the date of death or permanent disability, and (ii)
to make the death or disability benefit payments, as the case may be, provided
for in Paragraph 3(f), if any.
(b) In the event Telxon exercises its right of termination
pursuant to Paragraph 4(c) for "cause," or Employee otherwise leaves the employ
of Telxon prior to the expiration of this Agreement, then all of Telxon's
obligations under this Agreement shall end except for Telxon's obligations to
pay Employee's Base Salary and Incentive Compensation earned and accrued but
unpaid to the date of termination, against which obligations Telxon may set off
any claims by it against Employee for damages or otherwise.
(c) In the event Telxon exercises its right of termination other
than for cause pursuant to Paragraph 4(b), or if this Agreement expires, all of
Telxon's obligations under this Agreement shall end except for Telxon's
obligations under this Paragraph 5(c) and to pay Employee's Base Salary and
Incentive Compensation, if any, in each case earned and accrued but unpaid to
the Termination Date or the expiration of this Agreement, whichever occurs
first, and in the event that Telxon exercises such right of termination, Telxon
shall also pay to
4
<PAGE> 5
Employee for a period of twelve (12) months after the Termination Date, or
until March 31, 1995, whichever occurs later (the "Severance Period"),
severance pay at the Employee's annual rate of Base Salary in effect at the
time of such termination, payable in equal installments in such intervals as
the Board shall direct.
(d) In and as consideration for the payments made by Employer
under this Paragraph 5, Employee agrees under the terms of the United Kingdom
Employment Protection (Consolidation) Act 1978 or any successor thereto; (i) to
waive, renounce and otherwise exclude any and all rights to redundancy payment
in respect of the expiring of the term of this Agreement pursuant to Part IV of
said Act or otherwise; and (ii) to waive, renounce and otherwise exclude any
and all claims in respect of rights under Section 54 of said Act, or otherwise,
in relation to this Agreement.
6. COVENANT NOT TO COMPETE.
(a) For the purposes of this Paragraph 6, and of Paragraph 7, the
term "Telxon" shall mean Telxon Corporation, and its wholly or partially owned
subsidiaries, together with their respective successors and assigns.
(b) INDUCEMENT. This covenant between Employee and Telxon is
being executed and delivered by Employee in consideration of Employee's
employment with Telxon and Telxon's obligations hereunder (including, without
limitation, the Base Salary, the Incentive Compensation, the Bonus Compensation
and other benefits and payments set forth herein). Employee hereby acknowledges
that the covenant not to compete with Telxon contained in this Paragraph 6 was
and has been a condition of his employment with Telxon since Employee was
originally employed by Telxon. Employee further acknowledges that Telxon's
business and Employee's responsibilities are international in scope.
(c) RESTRICTED ACTIVITIES -- DURATION. Except as otherwise
consented to or approved by the Board in writing, Employee agrees that, in
addition to being operative during the term of this Agreement, the provisions
of Paragraph 6(c)(i) through (iii) hereof, inclusive, shall be operative for a
period of twelve (12) months after Employee's termination of employment with
Telxon or the expiration of the Severance Period, if any, whichever is later,
and regardless of the time, manner or reasons for termination. During such
periods, Employee will not, directly or indirectly, acting alone or as a member
of a partnership or as an owner (provided that ownership of not more than one
percent (1%) of the stock of any publicly traded company shall not be deemed
violative of this Paragraph), director, officer, employee, manager,
representative or consultant of any corporation or other business entity:
(i) engage in any business in competition with or adverse to
the business that is conducted by Telxon, or, without limiting the
generality of the foregoing, engage in any business which
manufactures, distributes, services or supports products which are of
a type manufactured, sold, marketed, serviced or supported by Telxon,
or which are in the process of development in which Employee has
participated, at the time of the
5
<PAGE> 6
termination of this Agreement or Employee's employment with Telxon, in
the United States, Canada, or any European, Asian, Pacific or other
foreign country in which Telxon then or thereafter transacts business
or is making a bona fide attempt to do so;
(ii) induce, request or attempt to influence any customers or
suppliers of Telxon to curtail or cancel their business with Telxon or
in any way interfere with Telxon's business relationships; or
(iii) induce, request or attempt to influence any other
employee, agent or representative of Telxon to terminate their
respective relationships with Telxon or in any way interfere with
Telxon's employee, agency or representative relationships.
(d) TOLLING; RELIEF AND OBLIGATIONS. In the event that Employee
breaches any provision of this Paragraph 6, such violation (i) shall toll the
running of the twelve (12) month period set forth in Paragraph 6(c) from the
date of commencement of such violation until such violation ceases, and (ii)
shall relieve Telxon of any obligations to Employee under this Agreement.
(e) "BLUE PENCILLING" OR MODIFICATION. If either the length of
time, geographic area or scope of restricted business activity set forth in
Paragraph 6(c) is deemed unreasonably restrictive or unreasonable in any other
respect in any court proceeding, Employee and Telxon agree and consent to such
court's modifying or reducing such restriction(s) to the extent deemed
reasonable under the circumstances then presented.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) For purposes of this Agreement, "Confidential Information" means
all information or trade secrets of any type or description belonging to Telxon
which are proprietary and confidential to Telxon and which are not publicly
disclosed or are only disclosed with restrictions. "Confidential Information"
includes, without limitation, strategic plans for carrying on business, other
business plans, cost data, internal financial information, customer lists,
employee lists, vendor lists, manufacturing methods or processes, product
research or engineering data, drawings, designs, schematics, flow charts,
computer programs, program decks, routines, subroutines, translators,
compilers, operating systems, object and source codes, specifications,
inventions, calculations, discoveries and any letters, papers, documents or
instruments disclosing or reflecting any of the foregoing, and all information
revealed to, acquired or created by Employee during Employee's employment by
Telxon relating to any of the foregoing.
(b) Employee acknowledges that the discharge of Employee's duties
under this Agreement will necessarily involve his access to Confidential
Information. Employee acknowledges that the unauthorized use by him or
disclosure by him of such Confidential Information to third parties might cause
irreparable damage to Telxon and Telxon's business. Accordingly, Employee
agrees that at all times after the date hereof he will not copy, publish,
6
<PAGE> 7
disclose, divulge to or discuss with any third party, nor use for his own
benefit, without the prior express written consent of the Board, except in the
normal conduct of his duties under this Agreement, any Confidential
Information, it being understood and acknowledged by Employee that all
Confidential Information created, compiled or obtained by Employee or Telxon,
or furnished to Employee by any person while Employee is associated with Telxon
remains its exclusive property.
(c) Promptly upon termination of his employment, irrespective of the
time or manner thereof or reason therefor, Employee agrees to return and
surrender to Telxon all Confidential Information in any manner in his control
or possession, as well as all other Telxon property.
8. REMEDIES INADEQUATE.
(a) Employee acknowledges that the services to be rendered by him to
Telxon as contemplated by this Agreement are special, unique and of
extraordinary character. Employee expressly agrees and understands that the
remedy at law for any breach by him of Paragraph 6 or Paragraph 7 of this
Agreement will be inadequate and that the damages flowing from such breach are
not readily susceptible to being measured in monetary terms. Accordingly, upon
adequate proof of Employee's violation of any legally enforceable provision of
Paragraph 6 or Paragraph 7 hereof, Telxon shall be entitled to immediate
injunctive relief, including, without limitation, a temporary order restraining
any threatened or further breach. In the event any equitable proceedings are
brought to enforce the provisions of Paragraph 6, Paragraph 7 or Paragraph 8
hereof, Employee agrees that he will not raise in such proceedings any defense
that there is an adequate remedy at law, and Employee hereby waives any such
defense. Nothing in this Agreement shall be deemed to limit Telxon's remedies
at law or in equity for any breach by Employee of any of the provisions of
Paragraph 6 or Paragraph 7 hereof which may be pursued or availed of by Telxon.
Without limiting the generality of the immediately preceding sentence, any
covenant on Employee's part contained in Paragraph 6 or Paragraph 7 hereof,
which may not be specifically enforceable shall nevertheless, if breached, give
rise to a cause of action for monetary damages.
(b) Employee has carefully considered, and has had adequate time and
opportunity to consult with his own counsel or other advisors regarding the
nature and extent of the restrictions upon him and the rights and remedies
conferred upon Telxon under Paragraphs 6, Paragraph 7 and Paragraph 8 hereof,
and hereby acknowledges and agrees that such restrictions are reasonable in
time, territory, and scope, are designed to eliminate competition which
otherwise would be unfair to Telxon, do not stifle the inherent skill and
experience of Employee, would not operate as a bar to Employee's sole means of
support, are fully required to protect the legitimate interests of Telxon and
do not confer a benefit upon Telxon disproportionate to the detriment to
Employee.
(c) The covenants and agreements made by Employee in Paragraph 6,
Paragraph 7 and Paragraph 8 hereof shall survive full payment by Telxon to
Employee of the amounts to which Employee is entitled under this Agreement, the
expiration of the Employment Period and this Agreement.
7
<PAGE> 8
9. INVENTIONS. Employee acknowledges and agrees that any
procedure, design feature, schematic, invention, improvement, development,
discovery, know how, concept, idea or the like (whether or not patentable,
registrable under copyright or trademark laws, or otherwise protectable under
similar laws) that Employee may conceive of, suggest, make, invent, develop or
implement, during the course of his service pursuant to this Agreement (whether
individually or jointly with any other person or persons), relating in any way
to the business of Telxon or to the general industry of which Telxon is a part,
as shall all physical embodiments and manifestations thereof, and all patent
rights, copyrights, trademarks (or applications therefor) and similar
protections therein, (all the foregoing referred to as "Work Product"), shall
be the sole, exclusive and absolute property of Telxon. All Work Product shall
be deemed to be works for hire, and to the extent that any Work Product may not
constitute a work for hire, Employee hereby assigns to Telxon all right, title
and interest in, to and under such Work Product, including without limitation,
the right to obtain such patents, copyright registrations, trademark
registrations or similar protections as Telxon may desire to obtain. Employee
will immediately disclose all Work Product to Telxon and agrees, at any time,
upon Telxon's request and without additional compensation, to execute any
documents and otherwise to cooperate with Telxon respecting the perfection of
its right, title and interest in, to and under such Work Product, and in any
litigation or controversy in connection therewith, all expenses incident
thereto to be borne by Telxon.
10. ASSIGNMENT OF EMPLOYEE'S RIGHTS. In no event shall Telxon be
obligated to make any payment under this Agreement to any assignee or creditor
of Employee. Prior to the time of payment under this Agreement, neither
Employee nor his legal representative shall have any right by way of
anticipation or otherwise to assign or otherwise dispose of any interest under
this Agreement.
11. TELXON'S OBLIGATIONS UNFUNDED. Except as to any benefits that
may be required to be funded under any benefit plan of Telxon pursuant to law
or pursuant to other agreements and which are not for the sole benefit of
Employee, the obligations of Telxon under this Agreement are not funded and
Telxon shall not be required to set aside or deposit in escrow any monies in
advance of the due date for payment thereof to Employee.
12. NOTICES. Any notice to be given hereunder by Telxon to
Employee shall be deemed to be given if delivered to Employee in person, or if
mailed to Employee, by certified mail, postage prepaid, return receipt
requested, at his address last known on the records of Telxon, and any notice
to be given by Employee to Telxon shall be deemed to be given if delivered in
person or by mail, postage prepaid, return receipt requested, to the Supervisor
at Telxon's offices in Akron, Ohio, unless Employee or Telxon shall have duly
notified the other in writing of a change of address. If mailed, such notice
shall be deemed to have been given when deposited in the mail as set forth
above.
8
<PAGE> 9
13. AMENDMENTS. This Agreement shall not be modified or
discharged, in whole or in part, except by an agreement in writing signed by
the parties hereto.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties. The parties are not relying on any other
representation, express or implied, oral or written. This Agreement supersedes
any prior employment agreement, written or oral, between Employee and Telxon.
15. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not affect the meaning of any terms or
provisions hereof.
16. BINDING EFFECT. The rights and obligations of Telxon
hereunder shall inure to the benefit of, and shall be binding upon, Telxon and
its successors and assigns, and the rights and obligations of Employee
hereunder shall inure to the benefit of, and shall be binding upon, employee
and his heirs, personal representatives and estate.
17. SEVERABLE PROVISIONS. The provisions of this Agreement
are severable, and if any one or more provisions may be determined to be
illegal or otherwise unenforceable, in whole or in part, the remaining
provisions and any partially enforceable provision shall be binding and
enforceable to the extent enforceable in any jurisdiction.
18. GOVERNING LAW AND VENUE. Except to the extent that the laws
of another jurisdiction mandatorily apply, all questions concerning the
validity or meaning of this Agreement or relating to the rights and obligations
of the parties with respect to performance under this Agreement shall be
construed and resolved under the laws of the State of Ohio applicable to
agreements made and to be performed therein, without regard to any conflicts or
choice of law rules or any presumption or construction against the party
causing this Agreement to be drafted. Any action, suit or proceeding relating
to or arising out of this Agreement or any of the transactions contemplated
hereby shall be brought in, and each of the parties irrevocably submits to the
jurisdiction of, any court of the State of Ohio sitting in Cuyahoga County,
Ohio or the Federal District Court for the Northern District of Ohio, Eastern
Division, sitting in Cleveland, Ohio. EACH OF THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR
PROCEEDING. Each party hereby irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based on the
grounds of FORUM NON CONVENIENS, which such party may now or hereafter have to
the bringing or registered mail, return receipt requested, provided that
nothing contained herein shall be deemed to affect the right of any party to
serve process in any manner permitted by law.
9
<PAGE> 10
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the day and year first above written, effective the Effective Date.
TELXON CORPORATION
By: /s/ DAN R. WIPFF
-----------------------------
Dan R. Wipff, President and
Chief Operating Officer
EMPLOYEE:
/s/ JOHN H. CRIBB
-----------------------------
John H. Cribb
10
<PAGE> 1
Exhibit 10.1.16.a
AGREEMENT TO AMEND AND RESTATE
ALLMAN EMPLOYMENT AGREEMENT
The Company and Lawrence L. Allman have agreed, subject to final documentation
thereof and the approval of such documentation by the Telxon Board of
Directors, to amend and restate Mr. Allman's April 12, 1993 Employment
Agreement as described below. Except as set forth below, the terms of that
Agreement will be continued without change in the amendment and restatement.
Term: Extended through March 31, 1999.
Salary: Base salary of $201,000 in FY95,
subject to increase but not decrease
upon review by the Itronix Board of
Directors at the end of each fiscal
year.
FY94 Bonus: A bonus of $126,184 based on
Itronix's FY94 results.
FY95-99 Bonuses: Bonus of up to 50% of salary in each
fiscal year, 75% of which bonus
shall be based on Itronix achieving
the Pre-Tax Income target approved
by the Itronix Board for that fiscal
year and 25% of which shall be based
on other objectives set by the
Itronix Board.
The portion of the bonus based on
financial performance shall be
awarded as follows: (a) if the Pre-
Tax Income target is met, the entire
financial performance based bonus
shall be awarded; (b) if 80% of the
Pre-Tax Income target is achieved,
50% of the financial performance
based bonus shall be awarded, and
(c) if between 80% and 100% of the
Pre-Tax Income target is met, a pro
rata portion of the bonus shall be
awarded. No bonus based on
financial performance shall be
awarded if Pre-Tax Income is less
than 80% of the target.
"Pre-Tax Income" shall mean pre-tax
income computed in accordance with
GAAP and SEC push-down accounting
rules and as such shall include all
executive compensation, bonuses, and
amortization and depreciation
including amortization and
depreciation resulting from good
will and capitalized acquisition
expenses.
FY95 Incremental Bonus: A bonus of up to $50,000 equal to
an agreed percentage of an agreed
increment of FY95 Pre-Tax Income in
excess of an agreed threshold.
<PAGE> 2
Stock Options: Options to purchase 110,000 shares
of Itronix common stock, subject to
capitalization adjustments, for an
aggregate $385,000 exercise price,
with 25% of such options vesting
immediately and the remaining options
vesting equally over three years and
upon vesting being exercisable in
whole or as to any part.
Additional Stock Options: Out of a pool of options to purchase
125,000 shares of Itronix common
stock, subject to capitalization
adjustments, reserved for future
grants to key Itronix employees and
Itronix management at a price to be
determined at the time of grant,
Allman shall receive 5,000 of the
pool options, vesting over three
years, if Itronix produces an agreed
threshold of Pre-Tax Income in the
first quarter of FY95.
Liquidity Bonus: At the end of three years, Allman
may at his option, subject to
certain conditions, relinquish and
cancel all stock, and all options to
purchase stock, of Itronix then held
in exchange for a bonus from Itronix
in an amount equal to (x) an agreed
percentage of AIBT for FY95 in
excess of an agreed threshold, plus
(y) an agreed percentage of AIBT for
FY96 in excess of an agreed
threshold reduced by (z) all bonuses
and incremental bonuses already paid
to specified officers of Itronix,
including Allman, in respect of FY95
and FY96. "AIBT" for these purposes
shall mean Itronix's income before
taxes adjusted to exclude (A) any
costs incurred as a result of the
acquisition of Itronix by Telxon or
(B) any corporate overhead costs
allocated by Telxon to Itronix.
Re-Signing Bonus: A $120,000 fee in consideration for
restructuring his compensation
package and executing the amended
and restated agreement.
Termination: Telxon shall have the right to
terminate his employment at any time
with or without cause; if without
cause, severance shall be paid over
the following twelve months at a
$201,000 annual rate.
Noncompete: Shall not directly or indirectly
compete for a period of 18 months
after termination of employment
regardless of the time, manner or
reason of such termination.
2
<PAGE> 1
Exhibit 10.2.1
LEASE
THIS LEASE is entered into and made as of the 30th day of December,
1986, by and between 3330 W. MARKET PROPERTIES, an Ohio General Partnership,
which has its principal office at 55 South Miller Road, Akron, Ohio 44313,
hereinafter called "Landlord" and TELXON CORPORATION, a Delaware corporation,
which has its principal office at 3330 West Market Street, Fairlawn, Ohio
44313, hereinafter called "Tenant".
W I T N E S S E T H:
Landlord, in consideration of the rents and covenants hereinafter set
forth, does hereby demise, let and lease to Tenant, and Tenant does hereby
hire, take and lease from Landlord, on the terms and conditions hereinafter set
forth, the following described space, hereinafter called the "Premises", to
have and to hold the same, with all appurtenances, unto Tenant for the term
hereinafter specified.
1. Description of the Premises.
The Premises are located in the City of Fairlawn, County of Summit,
State of Ohio, and include: (a) a certain tract of land containing
approximately 7.67 acres and commonly known as Summit Park Square, 3320, 3330
and 3340 West Market Street, on which Landlord's office buildings, hereinafter
called the "Buildings," containing a total of approximately 98,921 rentable
square feet, excluding those portions of the Buildings from time to time
subject to leaseholds in favor of third parties; and (b) a certain tract of
land contiguous with and south of the aforementioned 7.67 acre tract of land.
The Premises are more particularly described in Exhibit A attached to and made
a part of this Lease. Upon termination by expiration of the term or otherwise
of any lease in favor of a third party encumbering any part of the Buildings,
the premises covered by such lease shall be added to the Premises upon
restoration of such premises to "Building Standard" condition, i.e.,
broom-clean and freshly painted to Tenant's specifications.
2. Term and Possession.
(a) Term. Notwithstanding Section 2(b), the term of this Lease
shall be fifteen (15) years, beginning on the first day of January,
1987 (the "Commencement Date") and ending on the 31st day of December,
2001, unless terminated earlier as provided in this Lease.
(b) Early Occupancy. If Tenant begins to conduct business in
all or any portion of the Premises before the Commencement Date,
Tenant shall pay to Landlord on the Commencement Date a rental in
respect thereof for the period from the date Tenant begins to conduct
business therein to the Commencement Date, which rental shall be that
proportion of Rent for the calendar year 1987 which the number of days
in such period bears to 365. Except where clearly inappropriate, the
provisions of this Lease shall be applicable during such period.
(c) Acceptance of Premises. Taking possession of all or any
portion of the Premises by Tenant shall be conclusive as
against Tenant that the Premises or such portion thereof are in
satisfactory condition on the date of taking possession, subject only
to (i) matters specified in Tenant's written notice delivered to
Landlord on or before the date on which Tenant thus takes possession,
and (ii) latent defects.
3. Rent.
(a) Base Rent. Tenant shall pay to Landlord as base rent for
the Premises in respect of each year of the term of this Lease,
payable in advance and without notice in equal monthly installments
during each such
<PAGE> 2
year on the first day of each month during the term of this Lease, the
amount per square foot times the number of square feet from time to time
included in the Premises, as set forth below.
<TABLE>
<CAPTION>
Years Annual Rent Per Square Foot
<S> <C>
1987-1989 $13.78
1990-1994 14.75
1995-1999 16.23
2000-2001 17.85
</TABLE>
At such time as the number of square feet included in the Premises varies
such that the amount of base rent payable under this Lease is affected,
Landlord shall promptly deliver written notice of the new number of
square feet included in the Premises and the date from which the change
in the number of square feet included in the Premises shall have been
effective. Unless Tenant objects to the content of such notice within
thirty (30) days after its receipt thereof, Landlord's notice shall be
deemed conclusive and binding for purposes of calculating the amount of
base rent.
In addition to the base rent specified above, Tenant shall pay to
Landlord not later than thirty (30) days after either the end of each year
included in the term of this Lease or Tenant's receipt of Landlord's
statement therefor, whichever is later, the amount, if any, by which the
aggregate rent payable by third parties for all rentable premises other than
the Premises within the Buildings, including base rent and Annual Rental
Adjustment (as hereinafter defined) or the equivalent thereof, is less than the
aggregate number of square feet of such premises times the annual rent per
square foot specified above applicable to the year in question plus the Annual
Rental Adjustment applicable to such premises. Nothing contained in this
Section shall be deemed to constitute a guaranty by Tenant of Landlord's
collection of such amount payable, Tenant's obligation being limited to, and
defined by, the amount of rent payable (not collected) for such premises.
(b) Annual Rental Adjustment. In addition to the base rent
specified in Section 3(a) hereof, Tenant shall pay to Landlord as
additional rent for the Premises, in each calendar year throughout the
term of this Lease, a sum equal to Tenant's proportionate share of the
increase, if any, in Landlord's Total Cost of Operation of the Buildings
(as hereinafter defined) over the Base Expenses (as hereinafter defined)
and Tenant's proportionate share of the increase in real estate taxes
over Base Real Estate Taxes (as hereinafter defined). The amount of
Tenant's proportionate share of the increase in Landlord's Total Cost of
Operation of the Buildings and increase in real estate taxes for a
particular calendar year over the Base Expenses and Base Real Estate
Taxes (sometimes hereinafter referred to as the "Annual Rental
Adjustment") shall be estimated annually by Landlord, and written notice
thereof shall be given to Tenant at least thirty (30) days prior to the
beginning of each calendar year (in the case of 1987, not later than
March 31, 1987). Tenant shall pay each month, at the same time the
monthly installment of base rent is due, an amount equal to one-twelfth
(1/12) of the estimated Annual Rental Adjustment. Within ninety (90)
days after the end of each such calendar year, Landlord shall prepare and
deliver to Tenant a statement showing in reasonable detail the actual
amount of Landlord's Total Cost of Operation of the Building and real
estate taxes for the preceding calendar year and the actual amount of
Tenant's Annual Rental Adjustment. Within thirty (30) days after receipt
of the aforementioned statement, Tenant shall pay to Landlord, or
Landlord shall remit to Tenant, as the case may be, the difference
between the actual amount of Tenant's Annual Rental Adjustment for the
preceding calendar year and the estimated amount paid by Tenant during
such year.
-2-
<PAGE> 3
If the actual amount of Landlord's Total Cost of Operation of the
Buildings and real estate taxes for a particular calendar year is equal
to or less than that established for the Base Expenses and Base Real
Estate Taxes, then Tenant shall not be obligated to pay any Annual Rental
Adjustment, but Tenant shall not be entitled to any reimbursement or
abatement of base rent. If this Lease shall expire or be terminated on
any date other than the last day of a calendar year, the actual amount of
Tenant's Annual Rental Adjustment for such partial year shall be prorated
accordingly.
For purposes of this Section, the following definitions shall
apply:
(i) "Base Expenses" shall mean Landlord's predecessor's
Total Cost of Operation of the Buildings during 1986, which was
$3.871 per square foot or a total of $382,926 for the Buildings.
(ii) "Base Real Estate Taxes" shall mean real estate taxes
payable in respect of 1986 (other than penalties for late payment)
on the Buildings and the land included in the Premises, which were
$0.7893 per square foot or a total of $78,074 for the Buildings and
such land.
(iii) "Tenant's proportionate share" of the increase in
Base Expenses and the increase in Base Real Estate Taxes shall mean
the percentage determined by dividing the rentable area of the
Buildings from time to time included in the Premises by the total
rentable area within the Buildings (approximately 98,921 square
feet). For purposes of this lease, Tenant's proportionate share of
the increase in Base Expenses and Base Real Estate Taxes shall not
be combined but shall be calculated and billed separately.
(iv) "Landlord's Total Cost of Operation of the Buildings"
shall mean all of Landlord's direct costs and expenses of operation
and maintenance of the Buildings and the surrounding walks,
driveways, parking lot and landscaped areas (within the area
described in Exhibit A and outlined in Exhibit B) as determined by
Landlord in accordance with generally accepted accounting
principles or other recognized accounting practices, consistently
applied, plus all additional direct costs and expenses of operation
and maintenance which Landlord determines that it would have paid
or incurred if the Buildings had been one-hundred percent (100%)
occupied, including by way of illustration and not limitation:
insurance premiums, personal property taxes on personal property
used by Landlord in the Buildings; water, electrical and other
utility charges other than the separately billed electrical and
other charges paid by Tenant; service and other charges incurred in
the operation and maintenance of the elevators and the heating,
ventilation and air-conditioning system; cleaning services; tools
and supplies; landscape maintenance costs; building security
services; license and permit fees; building management fees; wages
and related employee benefits payable by Landlord to the on-site
employees of Landlord or its building management agent; and in
general all other costs and expenses which would, under generally
accepted accounting principles, consistently applied, be regarded
as operating and maintenance costs and expenses. "Landlord's Total
Cost of Operation of the Buildings" shall not include the cost of
tenant finish improvements or capital improvements' depreciation,
real estate brokerage and leasing commissions; principal and
interest payments on any mortgages or similar encumbrances; wages
and related employee benefits of Landlord's off-site management
personnel; and in general any other costs and expenses which would
not, under generally accepted accounting principles, consistently
applied, be regarded as operating and maintenance costs and
expenses incurred in connection with the Buildings.
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If Landlord shall, at any time after the Commencement Date, install
a labor-saving device or other equipment which improves the operating
efficiency of any system within the Buildings (such as an energy
management computer system) and thereby reduces any portion of Landlord's
Total Cost of Operation of the Buildings, then Landlord may, in
determining the amount of Tenant's Annual Rental Adjustment, add to
Landlord's Total Cost of Operation of the Buildings in each year during
the useful life of such installed device or equipment, an amount equal to
the annual depreciation or amortization allowance of the cost of such
installed device or equipment as determined in accordance with applicable
regulations of the Internal Revenue Service or generally accepted
accounting principles consistently applied; provided, however, that the
amount of such allowance shall not exceed the annual cost or expense
reduction properly attributable to such installed device or equipment.
Landlord's statement of the actual amount of Landlord's Total Cost
of Operation of the Buildings and real estate taxes for any particular
calendar year shall be signed by a general partner of Landlord and shall
state that, to the best of his knowledge and belief, the costs and
expenses listed therein accurately reflect the actual amount of
Landlord's Total Cost of Operation of the Buildings and real estate taxes
for such year. Tenant or its accountants shall have the right to inspect
and copy, at reasonable times and in a reasonable manner, during the one
hundred eighty (180) day period following Tenant's receipt of any such
statement, such of Landlord's books and records as pertain to and contain
information concerning such costs and expenses in order to verify the
amounts thereof.
If Tenant shall dispute any item or items included in the
determination of Landlord's Total Cost of Operation of the Buildings or
real estate taxes for a given calendar year, and such dispute is not
resolved by the parties hereto within one hundred eighty (180) days after
the statement for such year was received by Tenant, then either party
may, within thirty (30) days thereafter, request that a firm of certified
public accountants (other than such firm as then regularly serves Tenant)
selected by Tenant render an opinion as to whether or not the disputed
item or items may properly be included in the determination of Landlord's
Total Cost of Operation of the Buildings or real estate taxes for such
year; and the opinion of such firm on the matter shall be conclusive and
binding upon the parties hereto. The fees and expenses incurred in
obtaining such an opinion shall be borne by the party adversely affected
thereby; and if more than one item is disputed and the opinion adversely
affects both parties, the fees and expenses shall be apportioned
accordingly. If Tenant shall not dispute any item or items included in
the determination of Landlord's Total Cost of Operation of the Buildings
or real estate taxes for a given calendar year within one hundred eighty
(180) days after the statement for such year was delivered to it, Tenant
shall be deemed to have approved such statement.
(c) Service Charge. If any installment of base rent or
additional rent provided for herein, including the Annual Rental
Adjustment, or any part thereof, is not paid within ten (10) days after
its due date and notice of nonpayment thereof to Tenant, it shall be
subject to a service charge of one percent (1%) of the unpaid rent due
for each month, or such lesser amounts as may be the maximum amount
permitted by law, until paid.
4. Use of the Premises.
(a) Specific Use. The Premises shall be occupied and used as
office space and for all uses and purposes incidental thereto, including
but not limited to any and all computer facilities as may be required by
Tenant in connection with its business. ln addition, the Premises or any
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part thereof may be used for laboratory purposes, which purposes shall
mean and include use as a laboratory for soldering, mechanical assembly
and chemical or mechanical testing.
(b) Covenants Regarding Use. In connection with its use of the
Premises, Tenant agrees to do the following:
(i) Tenant shall use the Premises and conduct its
business thereon in a safe, careful, reputable and lawful manner;
shall keep and maintain the Premises in as good condition as they
were when Tenant first took possession thereof, ordinary wear and
acts of God excepted, and shall make all necessary repairs to the
Premises other than those which Landlord is obligated to make as
provided in this Lease.
(ii) Tenant shall not commit, nor allow to be committed,
in, on or about the Premises or the Buildings, any act of waste,
including any act which might deface, damage or destroy the
Buildings or any part thereof; use or permit to be used on the
Premises any hazardous substance, equipment or other thing which
might cause injury to person or property or increase the danger of
fire or other casualty in, on or about the Premises; permit any
objectionable or offensive noise or odors to be emitted from the
Premises; or do anything or permit anything to be done which would,
in Landlord's reasonable opinion, disturb or tend to disturb other
tenants occupying leased space in the Buildings.
(iii) Tenant shall not overload the floors of the Premises
beyond their designed weight-bearing capacity, which Landlord has
determined to be eighty (80) pounds per square foot live load,
including an allowance for partition load. Landlord reserves the
right reasonably to direct the positioning of all heavy equipment,
furniture and fixture which Tenant desires to place in the Premises
so as to distribute properly the weight thereof, and to require the
removal of any equipment or furniture which exceeds the weight
limit specified herein.
(iv) Tenant shall not use the Premises or allow the
Premises to be used for any purpose or in any manner which would
invalidate any policy of insurance now or hereafter carried on the
Buildings or increase the rate of premiums payable on any such
insurance policy. Should Tenant fail to comply with this covenant,
Landlord may require Tenant to reimburse Landlord as additional
rent for any increase in premiums charged during the term of this
Lease on the insurance carried by Landlord on the Premises and
attributable to the use being made of the Premises by Tenant.
(c) Compliance with Laws. Tenant shall comply with all laws,
statutes, ordinances, rules, regulations and orders of any federal,
state, municipal or other government or agency thereof having
jurisdiction over and relating to the use, condition and occupancy of the
Premises, except that Tenant shall not be responsible for or required to
make structural repairs to the Buildings or the Premises unless, in the
case of the latter, the need therefor is caused by its own negligence.
(d) Compliance with Building Rules and Regulations. Rules and
regulations reasonably governing the use and occupancy of the Premises
and all other leased space in the Buildings may be adopted by Landlord
for the mutual benefit and protection of all the tenants in the
Buildings. Tenant shall comply with and conform to the rules and
regulations from time to time in effect, so long as Tenant has been
provided a true, correct and complete copy of such rules and regulations.
Landlord shall have the right to change such rules and regulations or to
make new rules and regulations from time to time in any reasonable manner
that it deems necessary or desirable in order to insure the safety, care
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and cleanliness of the Buildings and the preservation of order therein.
Any such amendments to the rules and regulations shall be reasonable,
shall be set forth in writing and shall be given to Tenant, who shall
thereafter comply with and conform to the same.
5. Utilities and Other Building Services.
(a) Services to be Provided. Landlord shall furnish Tenant,
between the hours of 6:00 a.m. and 11:00 p.m. on Monday through Friday
and 6:00 a.m. and 5:00 p.m. on Saturday of each week except on legal
holidays on which Tenant's offices are closed and except as noted below,
with the following utilities and other building services to the extent
reasonably considered by Landlord to be necessary for Tenant's
comfortable use and occupancy of the Premises for general office use or
as may be required by law or directed by governmental authority:
(i) Heating, ventilation and air-conditioning;
(ii) Electricity for normal lighting and operating
business machines in the Premises and the common areas and
facilities of the Buildings;
(iii) Water for lavatory and drinking purposes;
(iv) Automatic elevator service;
(v) Cleaning and janitorial service, including the
supplying and installing of paper towels, toilet tissue and soap on
Monday through Friday of each week except legal holidays;
(vi) The washing of windows at reasonable intervals;
(vii) Replacement of all lamps, bulbs, starters and
ballasts as required from time to time as a result of normal usage;
(viii) Cleaning and maintenance of the common areas and
facilities of the Buildings and the walks, driveways, parking lot
and landscaped areas adjacent to the Buildings, including the
removal of rubbish and snow; and
(ix) Repair and maintenance of the Buildings and certain
systems within the Premises to the extent specified in Section 8
hereof.
Landlord hereby agrees to obtain and retain separate metering for
all electricity used in the Premises.
(b) Additional Services. If Tenant requests any other utilities
or building services in addition to those identified above or any of the
above utilities or building services in frequency, scope, quality or
quantities substantially greater than those which Landlord reasonably
determines are normally required by other tenants in the Buildings (or
other buildings substantially similar thereto) for general office use,
then Landlord shall use reasonable efforts to furnish Tenant with such
additional utilities or building services. In the event Landlord is able
to and does furnish such additional utilities or building services, the
cost thereof shall be borne by Tenant, who shall reimburse Landlord for
the same as provided in Section 5(d) hereof.
If any lights, machines or equipment (including but not limited to
computers) used by Tenant in the Premises materially affect the
temperature otherwise maintained by the Buildings' air-conditioning
system or generate substantially more heat in the Premises than that
which would normally be generated by the lights and business machines
typically used by other tenants in the Buildings or by tenants in
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substantially similar office buildings, then Landlord shall have the
right to install any machinery or equipment which Landlord considers
reasonably necessary in order to restore the temperature balance between
the Premises and the rest of the Buildings, including that which modifies
the Buildings' air-conditioning system. All costs expended by Landlord
to install any such machinery and equipment and any additional cost of
operation and maintenance occasioned thereby shall be borne by Tenant,
who shall reimburse Landlord for the same as provided in Section 5(d)
hereof.
Tenant shall not install or connect any electrical equipment other
than (i) that heretofore installed or connected, including but not
limited to a computer unit, special air-conditioning for the computer
unit, and a burglar alarm system, or replacements thereof, or (ii) the
business machines typically used for general office use by tenants in
office buildings comparable to the Buildings, without Landlord's prior
written consent, which consent shall not be unreasonably withheld. If
Landlord determines that electrical equipment to be so installed or
connected exceeds the designed load capacity of the Building's electrical
system or is in any way incompatible therewith, then Landlord shall have
the right, as a condition to granting its consent, to make such
modifications to the electrical system or other parts of the Buildings or
the Premises as are reasonably required, or to require Tenant to make
such modifications to the equipment to be installed or connected, as
Landlord reasonably considers to be necessary before such equipment may
be so installed or connected. The cost of any such modifications shall
be borne by Tenant, who shall reimburse Landlord for the same (or any
portion thereof paid by Landlord) as provided in Section 5(d) hereof.
Tenant shall have the right, after normal business hours, to take actions
which would prohibit the elevators from stopping at any floor on which
Tenant is the only tenant, provided that Tenant shall provide Landlord
with any cards or keys necessary to enable Landlord to have access to all
such floors at any time.
(c) Interruption of Services. Tenant understands, acknowledges
and agrees that any one or more of the utilities or other building
services identified above may be interrupted by reason of accident,
emergency or other causes beyond Landlord's control, or may be
discontinued or diminished temporarily by Landlord or other persons until
certain repairs, alterations or improvements can be made; that Landlord
does not represent or warrant the uninterrupted availability of such
utilities or building services; and that any such interruption shall not
be deemed an eviction or disturbance of Tenant's right to possession,
occupancy and use of the Premises or any part thereof, or, except in the
case of an interruption caused by the negligence or willful tort of
Landlord, its agents or employees, render Landlord liable to Tenant in
damages by abatement of rent or otherwise, or relieve Tenant from the
obligation to perform its covenants under this Lease. Landlord shall,
however, use its best efforts to restore any interrupted services as
promptly as possible.
(d) Payment of Utilities and Building Services. The cost of the
following utilities and other building services shall be borne by Tenant,
who shall be separately billed therefor and who shall reimburse and pay
Landlord monthly for the same as additional rent, at the same time the
monthly installment of base rent and other additional rent is due:
(i) Except to the extent paid by Tenant directly to the
utility providing same, all electricity used by Tenant for lighting
and operating business machines and equipment in the Premises. The
monthly amount to be billed for electricity so used by Tenant shall
be determined by Landlord on the basis of (A) the prevailing rates
for electrical usage charged in the municipality where the
Buildings are located, including any taxes levied thereon, and
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(B) the total number of kilowatt hours of electricity actually
consumed per month by Tenant in lighting and operating business
machines and equipment in the Premises;
(ii) All replacement lamps, bulbs, starters and ballasts
used in the Premises to the extent furnished by Landlord at
Tenant's request and the cost of their installation if done by
Landlord; and
(iii) All additional utilities or other building services
furnished by Landlord at the request of Tenant or as a result of
Tenant's activities as provided in Section 5(b) hereof.
The cost of all other utilities and building services identified in
Section 5(a) hereof shall be borne by Landlord.
6. Parking.
Landlord hereby gives to Tenant, its employees, agents, customers and
invitees, the privilege of parking in the parking lot adjacent to
the Buildings. The same privilege has been or will be given to other tenants
in the Buildings and to their employees, agents, customers and invitees, and it
does not entitle Tenant or the other tenants to any particular assigned spaces
in the parking lot. Landlord shall, however, reserve ten (10) parking spaces
in close proximity to the Buildings and shall mark such spaces with the words
"Visitor Parking".
7. Signs.
Tenant shall be permitted to have tenant identification information
included or shown on the directory board in the main lobby and on the tenant
access door to the Premises. Tenant shall be permitted to install an exterior
sign so long as such sign is approved by the appropriate public authority, is
in front of Building C (and/or such other Building(s) of which Tenant is the
sole occupant), is substantially similar to the signs in front of the
other Buildings and is approved by Landlord, which approval shall not be
unreasonably withheld or delayed. In addition, at such time as Tenant is the
sole occupant of the Buildings, Tenant shall have the right to rename the
Buildings to identify same with Tenant (e.g., "Telxon World Headquarters" or
"The Telxon Building," such examples being for purposes of illustration only
and not by way of limitation).
8. Repairs, Maintenance, Alterations, Improvements and Fixtures.
(a) Repair and Maintenance of Buildings. Landlord shall keep and
maintain in good order, condition and repair the roof, exterior and
interior structural walls (including any plate glass windows which are
a part thereof), foundation, basement, the common areas and facilities
of the Buildings and the electrical, plumbing, heating, ventilation and
air-conditioning systems serving the Premises and other parts of the
Buildings. The cost of all repairs required to be made by Landlord
shall be borne by Landlord unless made necessary by the negligence,
misuse or default of Tenant, its employees, agents, customers or
invitees, in which event they shall be borne by Tenant, who shall be
separately billed and shall reimburse Landlord for the same as
additional rent.
(b) Repair and Maintenance of the Premises. Except as provided
in Section 8(a) hereof, Tenant shall, at its own expense, keep and
maintain the Premises in good order, condition and repair.
(c) Alterations or Improvements. Tenant may make, or permit to
be made, alterations or improvements to the Premises, but in the case of
alterations or improvements requiring an expenditure in excess of Five
Thousand Dollars ($5,000.00) only if Tenant obtains the prior written
consent of Landlord thereto, which consent shall not be unreasonably
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withheld or delayed. Tenant shall make any and all such alterations and
improvements in accordance with all applicable laws and building codes,
in a good and workmanlike manner and in quality equal to or better than
the original construction of the Buildings and shall comply with such
requirements as Landlord reasonably considers necessary or desirable,
including without limitation requirements as to the manner in which and
the times at which such work shall be done. Tenant shall promptly pay
all costs attributable to such alterations and improvements and shall
indemnify Landlord against any mechanics' liens or other liens or claims
filed or asserted as a result thereof and against any costs or expenses
which may be incurred as a result of building code violations
attributable to such work. Tenant shall promptly repair any damage to
the Premises or the Buildings caused by any such alterations or
improvements. Any alterations or improvements to the Premises, except
movable office furniture and equipment and trade fixtures, shall become a
part of the realty and the property of Landlord, and shall not be removed
by Tenant without the consent of Landlord, which consent shall not be
unreasonably withheld or delayed.
Tenant's rights under this Section shall include without limitation
the right to construct or cause to be constructed additions to the
Buildings and/or expansion of the parking areas, provided that Tenant
complies with all the requirements of this Section and those of
applicable laws and ordinances, including but not limited to zoning
ordinances, and governmental rules and regulations promulgated
thereunder, and provided further that prior to any such construction or
expansion Landlord and Tenant shall have agreed in writing with respect
to responsibility for payment of the costs thus incurred and any
additional rent payable for such additions to the Premises. In the event
Landlord and Tenant shall be unable to agree in this connection within
ninety (90) days following Tenant's submission to Landlord of a written
proposal, including plans and specifications, for such additions and/or
expansion, then either Landlord or Tenant shall have the right to submit
the matter as to which Landlord and Tenant have been unable to agree to
the American Arbitration Association in Akron, Ohio for arbitration in
accordance with the commercial rules thereof then in effect, which
arbitration shall be conclusive and binding upon the parties for the
purposes of this Lease. In the event Landlord or an affiliate thereof is
known by Tenant to be engaged in the construction business, Tenant shall
afford Landlord or such affiliate an opportunity to bid for the contract
to construct any and all alterations, improvements, additions or
expansion contemplated under this Section, but Tenant shall nonetheless
retain unrestricted discretion in electing to accept or reject any bid
submitted by Landlord or its affiliate, whether or not such bid is the
most favorable submitted in strictly monetary terms.
Promptly on execution of this Lease, or at a mutually agreed time,
Landlord shall at its sole cost and expense, without any obligation on
Tenant's part under Section 3(b) hereof or otherwise, commence and, as
soon as practicable, complete a landscaping plan and remodeling and
redecorating of the main reception area of Tenant so as to enhance the
image of Tenant's main reception area and raise same to a level
commensurate with the status of the Premises as Tenant's world
headquarters.
(d) Trade Fixtures. Any trade fixtures installed on the Premises
by Tenant at its own expense, including but not limited to movable
partitions, counters, shelving, showcases, mirrors and the like, may and,
at the request of Landlord, shall be removed on the Expiration Date or
earlier termination of this Lease, provided that Tenant is not then in
default, that Tenant bears the cost of such removal, and further that
Tenant repairs at its own expense any and all damage to the Premises
resulting from such removal. If Tenant fails to remove any and all such
trade fixtures from the Premises on the Expiration Date or earlier
termination of this Lease, all such trade fixtures shall become the
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property of Landlord unless Landlord elects to require their removal, in
which case Tenant shall promptly remove same and restore the Premises to
their prior condition.
9. Fire or Other Casualty; Casualty Insurance
(a) Substantial Destruction of the Buildings. If the Buildings
should be substantially destroyed (which, as used herein, means
destruction or material damage to at least 50% of the Buildings) by fire
or other casualty or the Premises rendered wholly or substantially
untenantable for the purposes for which they were leased, Tenant may, at
its option, terminate this Lease by giving written notice thereof to the
other party within thirty (30) days of such casualty. In such event, the
rent shall be apportioned to and shall cease as of the date of such
casualty. In the event Tenant does not exercise this option, then the
Premises shall be reconstructed and restored at Landlord's expense.
(b) Partial Destruction of the Premises. If the Premises should
be rendered partially untenantable for the purpose for which they were
leased (which, as used herein, means such destruction or damage as would
prevent Tenant from carrying on its business on the Premises to an extent
exceeding 20% of its normal business activity) by fire or other casualty,
then such damaged part of the Premises shall be reconstructed and
restored, at Landlord's expense; rent shall be abated in the proportion
which the approximate area of the damaged part bears to the total area in
the Premises from the date of the casualty until substantial completion
of the reconstruction repairs; and this Lease shall continue in full
force and effect for the balance of the term. Landlord shall use
reasonable diligence in completing such reconstruction repairs, but in
the event Landlord fails to complete the same within one hundred eighty
(180) days from the date of the casualty, or if at such time it is
apparent that Landlord will not be able to reconstruct the Premises in
one hundred eighty (180) days, or if such casualty occurs during the last
twelve (12) months of the term of this Lease, then Tenant may, at its
option, terminate this Lease upon giving Landlord written notice to that
effect, whereupon both parties shall be released from all further
obligations and liability hereunder.
(c) Casualty Insurance. Landlord shall be responsible for
insuring and shall at all times during the term of this Lease carry, at
its own expense, a policy of insurance which insures the Buildings,
including the Premises, against loss or damage by fire or other casualty
(namely, the perils against which insurance is afforded by the standard
fire insurance policy and extended coverage endorsement); provided,
however, that Landlord shall not be responsible for, and shall not be
obligated to insure against, any loss or damage to personal property
(including, but not limited to, any furniture, machinery, equipment,
goods or supplies) of Tenant or which Tenant may have on the Premises or
any trade fixtures installed by or paid for by Tenant on the Premises or
any additional improvements which Tenant may construct on the Premises.
(d) Waiver of Subrogation. Landlord and Tenant hereby release
each other and each other's employees, agents, customers and invitees
from any and all liability for any loss, damage or injury to person or
property occurring in, on or about or to the Premises, improvements to
the Buildings or personal property within the Buildings, by reason of
fire or other casualty which could be insured against under a standard
fire and extended coverage insurance policy, regardless of cause,
including the negligence of Landlord or Tenant and their employees,
agents, customers and invitees. Because the provisions of this Section
will preclude the assignment of any claim mentioned herein by way of
subrogation or otherwise to an insurance company or any other person,
each party to this Lease shall give to each insurance company which has
issued to it one or more policies of fire and extended coverage insurance
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notice of the terms of the mutual releases contained in this Section, and
have such insurance policies properly endorsed, if necessary, to prevent
the invalidation of insurance coverages by reason of the mutual releases
contained in this Section.
10. General Public Liability, Indemnification and Insurance.
(a) Tenant shall be responsible for, shall have the obligation to
insure against and shall indemnify Landlord and hold it harmless from any
and all liability for any loss, damage or injury to person or property
occurring in, on or about the Premises, regardless of cause, including
the negligence of Landlord and its employees, agents, customers and
invitees, and Tenant hereby releases Landlord from any and all liability
for the same. Tenant's obligation to indemnify Landlord hereunder shall
include the duty to defend against any claims asserted by reason of such
loss, damage or injury and to pay any judgments, settlements, costs, fees
and expenses, including attorneys' fees, incurred in connection
therewith.
(b) Tenant, in order to enable it to meet its obligation to
insure against the liabilities specified in Section 10(a) hereof, shall
at all times during the term of this Lease carry, at its own expense, for
the protection of Tenant, Landlord and Landlord's management agent, if
any, as their interests may appear, one or more policies of general
public liability and property damage insurance, issued by one or more
insurance companies acceptable to Landlord, with minimum coverages of
$300,000 for injury to one person in any one accident, $500,000 for
injuries to more than one person in any one accident and $100,000 in
property damage per accident and insuring against any and all liability
for which Tenant is responsible hereunder. Such insurance policy or
policies shall name Landlord as an insured and shall provide that same
may not be cancelled on less than ten (10) days prior written notice to
Landlord. Tenant shall furnish Landlord with a copy of all certificates
evidencing such insurance. Should Tenant fail to carry such insurance
and furnish Landlord with a copy of all such policies after a request to
do so, Landlord shall have the right to obtain such insurance and collect
the cost thereof from Tenant as additional rent.
(c) Landlord shall be responsible for, shall have the obligation
to insure against, and shall indemnify Tenant and hold it harmless from
any and all liability for any loss, damage or injury to person or
property occurring in, on or about the common areas and facilities of the
Buildings and the walks, driveways, parking lot and landscaped areas
adjacent to the Buildings, regardless of cause, including the negligence
of Tenant and its employees, agents, customers and invitees; and Landlord
hereby releases Tenant from any and all liability for the same.
Landlord's obligation to indemnify Tenant hereunder shall include the
duty to defend against any claims asserted by reason of such loss, damage
or injury and to pay any judgments, settlements, costs, fees and
expenses, including attorneys' fees, incurred in connection therewith.
11. Eminent Domain.
If the whole or any part of the Premises shall be taken for public or
quasi-public use by a governmental authority under the power of eminent domain
or shall be conveyed to a governmental authority in lieu of such taking, and if
such taking or conveyance shall cause the remaining part of the Premises to be
untenantable or inadequate for use by Tenant for the purposes for which they
were leased, then Tenant may, at its option, terminate this Lease as of the
date Tenant is required to surrender possession of the Premises. If all or any
portion of the parking area shall be taken or conveyed and such taking or
conveyance substantially interferes with the contemplated use of the Premises
by Tenant, then Tenant shall have the right to terminate this Lease as of the
date of surrender of possession. Landlord shall have the right to provide
parking on adjoining parcels of land in substitution for any parking area so
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taken or conveyed. All compensation awarded for such taking or conveyance
shall be the property of Landlord without any deduction therefrom for any
present or future estate of Tenant, and Tenant hereby assigns to Landlord all
its right, title and interest in and to any such award. However, Tenant shall
have the right to recover from Landlord such compensation as may be awarded to
Tenant on account of moving and relocation expenses and depreciation to and
removal of Tenant's trade fixtures and personal property.
12. Liens.
If, because of any act or omission of Tenant or anyone claiming by,
through or under Tenant, any mechanic's liens or other lien shall be filed
against the Premises or the Buildings or against other property of Landlord
(whether or not such lien is valid or enforceable as such), Tenant shall, at
its own expense, cause the same to be discharged of record by payment, bonding
or otherwise within a reasonable time, not to exceed thirty (30) days, after
the date of filing and notice thereof to Tenant, and shall also indemnify
Landlord and hold it harmless from any and all claims, losses, damages,
judgments, settlements, costs and expenses, including attorneys' fees,
resulting therefrom or by reason thereof.
13. Rental, Personal Property and Other Taxes.
(a) Tenant shall pay before delinquency any and all taxes,
assessments, fees or charges (hereinafter referred to as "taxes"),
including any sales, gross income, rental, business occupation or other
taxes, levied or imposed upon Tenant's business operations in the
Premises and any personal property or similar taxes levied or imposed
upon Tenant's trade fixtures, leasehold improvements or personal property
located within the Premises. In the event any such taxes are charged to
the account of, or are levied or imposed upon the property of, Landlord,
Tenant shall reimburse Landlord for the same as additional rent.
Notwithstanding the foregoing, Tenant shall have the right to contest in
good faith any such tax and to defer payment, if required, until after
Tenant's liability therefor is finally determined.
(b) If any tenant finish improvements, trade fixtures,
alterations or improvements or business machines and equipment located
in, on or about the Premises, regardless of whether they are installed or
paid for by Landlord or Tenant and whether or not they are affixed to and
become a part of the realty and the property of Landlord, are assessed
for real property tax purposes at a valuation higher than that at which
other such property in other leased space in the Buildings is assessed,
then Tenant shall reimburse Landlord as additional rent for the amount of
real property taxes shown on the appropriate county official's records as
having been levied upon the Building or other property of Landlord by
reason of such excess assessed valuation.
14. Assignment and Subletting.
(a) Except as expressly permitted pursuant to this section,
Tenant shall not, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed, assign or
hypothecate this Lease or any interest herein or sublet the Premises or
any part thereof, or permit the use of the Premises by any party other
than Tenant. Any of the foregoing acts without such consent shall be
void and shall, at the option of Landlord, terminate this Lease. This
Lease shall not, nor shall any interest herein, be assignable as to the
interest of Tenant by operation of law without the written consent of
Landlord.
(b) Notwithstanding the provisions of Section (a) above, Tenant
may assign this Lease or sublet the Premises or any portion thereof,
without Landlord's consent and without extending any option to Landlord,
to any corporation which controls, is controlled by or is under common
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<PAGE> 13
control with Tenant, or to any corporation resulting from the merger or
consolidation with Tenant, or to any person or entity which acquires all
the assets of Tenant as a going concern of the business that is being
conducted on the Premises, provided that said assignee assumes, in full,
the obligations of Tenant under this Lease.
(c) Regardless of Landlord's consent, no subletting or assignment
shall release Tenant of Tenant's obligation or alter the primary
liability of Tenant to pay the rental and to perform all other
obligations to be performed by Tenant hereunder. The acceptance of rent
by Landlord from any other person shall not be deemed to be a waiver by
Landlord of any provision hereof. Consent to one assignment or
subletting shall not be deemed consent to any subsequent assignment or
subletting. In the event of default by an assignee of Tenant or any
successor of Tenant in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of
exhausting remedies against such assignee or successor. Landlord may
consent to subsequent assignments or subletting of this Lease or
amendments or modifications to this Lease with assignees of Tenant,
without notifying Tenant, or any successor of Tenant, and without
obtaining its or their consent thereto and such action shall not relieve
Tenant of liability under this Lease.
15. Transfers by Landlord.
(a) Sales, Conveyance and Assignment. Nothing in this Lease
shall restrict the right of Landlord to sell, convey, assign or otherwise
deal with the Buildings, subject to the rights of Tenant under this
Lease.
(b) Effect of Sale, Conveyance or Assignment. A sale, conveyance
or assignment of the Buildings shall operate to release Landlord from
liability from and after the effective date thereof upon all of the
covenants, terms and conditions of this Lease, express or implied, except
as such may relate to the period prior to such effective date, and Tenant
shall thereafter look solely to Landlord's successor in interest in and
to this Lease. This Lease shall not be affected by any such sale,
conveyance or assignment, and Tenant shall attorn to Landlord's successor
in interest thereunder, provided such successor shall expressly assume
all of the obligations of Landlord under this Lease.
(c) Subordination. Landlord reserves the right to subject and
subordinate this Lease at all times to the lien of any first mortgage(s)
now or hereafter placed upon Landlord's interest in the leased premises
and on the land and buildings of which the leased premises are a part or
upon any buildings hereafter placed upon the land which the leased
premises are a part, and Tenant shall execute and deliver any and all
documents necessary to evidence such subordination. No default by
Landlord under any such first mortgage(s) shall affect Tenant's rights
hereunder so long as Tenant is not in default under this Lease. Tenant
shall, in the event any proceedings are brought for the foreclosure of,
or in the event of exercise of the power of sale under any mortgage made
by Landlord covering the leased premises, attorn to the purchaser upon
any such foreclosure or sale and recognize such purchaser as Landlord
under this Lease.
(d) It is a condition, however, of the sale, subordination and
lien provisions set forth in this Section, that Landlord shall procure
from any such successor, purchaser, mortgagee or trustee an agreement in
writing, which shall be delivered to Tenant, providing in substance that
so long as Tenant shall faithfully discharge the obligations on its part
to be kept and performed under the terms of this Lease, Tenant's tenancy
will not be disturbed nor this Lease affected by any default under such
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<PAGE> 14
mortgage or deed of trust, and the successor, purchaser, mortgagee or
trustee agrees that this Lease shall remain in full force and effect even
though default in the mortgage or deed of trust may occur.
(e) As a condition precedent to Tenant's obligations hereunder,
Landlord shall procure from any person, company, partnership, corporation
or entity which now has or may have at the commencement of this Lease a
mortgage lien encumbering the Demised Premises, an agreement in writing,
which shall be delivered to Tenant, providing in substance that so long
as Tenant shall faithfully discharge the obligations on its part to be
kept and performed under the terms of this Lease, its tenancy will not be
disturbed nor this Lease affected by any default under such mortgage, and
the agreement and acknowledgment of any such mortgagee that this Lease
shall remain in full force and effect even though default in the mortgage
may occur.
16. Defaults and Remedies.
(a) Default by Tenant. The occurrence of any one or more of the
following events shall be a default and breach of this Lease by Tenant:
(i) Tenant shall fail to pay (A) any monthly installment
of base rent or the Annual Rental Adjustment and such nonpayment
shall not have been cured within five (5) business days after the
date of Tenant's receipt of notice of such nonpayment, or (B) any
other additional rent and such nonpayment shall not have been cured
within thirty (30) days after the date of Tenant's receipt of
notice of such nonpayment;
(ii) Tenant shall fail to perform or observe any term,
condition, covenant or obligation required to be performed or
observed by it under this Lease for a period of thirty (30) days
after notice thereof from Landlord; provided, however, that if the
term, condition, covenant or obligation to be performed by Tenant
is of such nature that the same cannot reasonably be performed
within such thirty (30) day period, such default shall be deemed to
have been cured if Tenant commences such performance within said
thirty (30) day period and thereafter diligently undertakes to
complete the same;
(iii) A trustee or receiver shall be appointed to take
possession of substantially all of Tenant's assets in, on or about
the Premises or of Tenant's interest in this Lease (and Tenant does
not regain possession within sixty (60) days after such
appointment); Tenant makes an assignment for the benefit of
creditors; or substantially all of Tenant's assets in, on or about
the Premises or Tenant's interest in this Lease are attached or
levied upon under execution (and Tenant does not discharge the same
within sixty (60) days thereafter); and
(iv) A petition in bankruptcy, insolvency, or for
reorganization or arrangement is filed by or against Tenant
pursuant to any federal or state statute (and, with respect to any
such petition filed against it, Tenant fails to secure a stay or
discharge thereof within sixty (60) days after the filing of the
same).
(b) Remedies of landlord. Upon the occurrence of any event of
default set forth in Section 16(a) hereof, Landlord shall have the
following rights and remedies, in addition to those allowed by law, any
one or more of which may be exercised without further notice to or demand
upon Tenant:
(i) Landlord may re-enter the Premises and cure any
default of Tenant, in which event Tenant shall reimburse Landlord
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<PAGE> 15
as additional rent for any cost and expenses which Landlord may
incur to cure such default; and Landlord shall not be liable to
Tenant for any loss or damage which Tenant may sustain by reason of
Landlord's action, regardless of whether caused by Landlord's
negligence or otherwise;
(ii) Landlord may terminate this Lease as of the date of
such default, in which event: (A) neither Tenant nor any person
claiming under or through Tenant shall thereafter be entitled to
possession of the Premises, and Tenant shall immediately thereafter
surrender the Premises to Landlord; (B) Landlord may re-enter the
Premises and dispossess Tenant or any other occupants of the
Premises by force, summary proceedings, ejectment or otherwise, and
may remove their effects, without prejudice to any other remedy
which Landlord may have for possession or arrearages in rent; and
(C) upon the termination of this Lease Landlord shall use its best
efforts to re-let all or any part of the Premises for a term which
may be different from that which would otherwise have constituted
the balance of the term of this Lease and for rent and on terms and
conditions which may be different from those contained herein,
whereupon Tenant shall be obligated to pay to Landlord as
liquidated damages the difference between the rent provided for
herein and that actually received pursuant to any lease covering a
subsequent re-letting of the Premises, for the period which would
otherwise have constituted the balance of the term of this Lease,
together with all of Landlord's costs and expenses for preparing
the Premises for re-letting, including all repairs, tenant finish
improvements, brokers' and attorneys' fees, and all loss or damage
which Landlord may sustain by reason of such termination, re-entry
and re-letting, it being expressly understood and agreed that the
liabilities and remedies specified in this Section 16(b)(ii) shall
survive the termination of this Lease; and
(iii) Landlord may sue for injunctive relief or to recover
damages for any loss resulting from the breach.
Any agreement for an extension or renewal of the term of this Lease
or any additional period thereafter, shall not thereby prevent Landlord
from terminating this Lease during the term hereof for any reason
specified in this Lease. If any such right of termination is exercised
by Landlord during the term of this Lease or any extension or renewal
hereof, Tenant's right to any further extension or renewal of this Lease
shall thereby be automatically cancelled. Any such right of termination
of Landlord contained herein shall continue during the term of this Lease
and any subsequent extension or renewal hereof.
(c) Non-Waiver of Defaults. The failure or delay by either party
hereto to enforce or exercise at any time any of the rights or remedies
or other provisions of this Lease shall not be construed to be a waiver
thereof, nor affect the validity of any part of this Lease or the right
of either party thereafter to enforce each and every such right or remedy
or other provisions. No waiver of any default and breach of this Lease
shall be held to be a waiver of any other default and breach. The
receipt of rent by Landlord at a time after rent is due under this Lease
shall not be construed as a waiver of such default. The receipt by
Landlord of less than the full rent due shall not be construed to be
other than a payment on account of rent then due, nor shall any statement
on Tenant's check or any letter accompanying Tenant's check be deemed an
accord and satisfaction, and Landlord may accept such payment without
prejudice to Landlord's right to recover the balance of the rent due or
to pursue any other remedies provided in this Lease. No act or omission
by Landlord or its employees or agents during the term of this Lease
shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such a surrender shall be valid unless in writing and
signed by Landlord.
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<PAGE> 16
17. Access to the Premises.
Landlord, its employees and agents and any mortgagee of the Buildings
shall have the right to enter any part of the Premises upon reasonable notice
to Tenant at all reasonable times for the purposes of examining or inspecting
the same, showing the same to prospective purchasers, mortgagees or tenants and
for making such repairs, alterations or improvements to the Premises or the
Buildings as Landlord may deem necessary or desirable. If representatives of
Tenant shall not be present to open and permit such entry into the Premises at
any time when such entry is necessary by reason of emergency, Landlord and its
employees and agents may enter the Premises by means of a master key or
otherwise. Such entry shall not constitute an eviction of Tenant or a
termination of this Lease, or entitle Tenant to any abatement of rent therefor.
18. Surrender of Premises.
Upon the expiration or earlier termination of this Lease, Tenant shall
surrender the Premises to Landlord, together with all alterations, improvements
and other property as provided elsewhere herein, in broom-clean condition and
in good order, condition and repair, except for ordinary wear and tear and
damage which Tenant is not obligated to repair, failing which Landlord may
restore the Premises to such condition at Tenant's expense. Upon such
expiration or termination, Tenant's trade fixtures, furniture and equipment,
including but not limited to computer equipment, shall remain Tenant's
property, and if Tenant shall not be in default under this Lease, Tenant shall
have the right to remove the same. Tenant shall promptly repair any damage
caused by any such removal, and shall restore the Premises to the condition
existing prior to the installation of the items so removed.
19. Holding Over.
In the event Tenant remains in possession of the Premises with the
consent of Landlord after the expiration or earlier termination of this Lease,
Tenant shall be deemed to hold the Premises as a tenant at will, subject to all
of the terms, conditions, covenants and provisions of this Lease (which shall
be applicable during the holdover period), except that Tenant shall pay to
Landlord such rent as Landlord shall then specify, which rent shall be payable
to Landlord on demand. Tenant shall vacate and surrender the Premises to
Landlord upon Tenant's receipt of notice from Landlord to vacate. No holding
over by Tenant, whether with or without the consent of Landlord, shall operate
to extend this Lease except as otherwise expressly provided herein.
20. Definition of Landlord, Landlord's Liability.
The term "Landlord" as used in this Lease so far as covenants or
obligations on the part of Landlord are concerned shall be limited to mean and
include only the owner or owners at the time in question of the fee of the
leased premises, and in the event of any transfer or transfers of the title to
such fee the Landlord herein named (and in case of any subsequent transfers or
conveyances the then grantor) shall be automatically freed and relieved from
and after the date of such transfer or conveyance of all personal liability as
respects the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed, provided that any
funds in the hands of such Landlord or the then grantor at the time of such
transfer, in which Tenant has an interest, shall be turned over to the grantee
and any amount then due and payable to Tenant by Landlord of the then grantor
under any provision of this Lease shall be paid to Tenant, it being intended
hereby that the covenants and obligations contained in this Lease on the part
of Landlord shall, subject as aforesaid, be binding on Landlord, its successors
and assigns, only during and in respect of their respective successive periods
of ownership.
If Landlord shall fail to perform any covenant, term or condition of
this Lease upon Landlord's part to be performed, and if as a consequence of
such default Tenant shall recover a money judgment against Landlord, such
judgment
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<PAGE> 17
shall be satisfied only out of the proceeds of sale received upon execution of
such judgment and levied against the right, title and interest of Landlord in
the Buildings and out of rents or other income from such property receivable by
Landlord, or out of the consideration received by Landlord from the sale or
other disposition of all or any part of Landlord's right, title and interest in
the Buildings, and Landlord shall not be liable for any deficiency.
21. Quiet Enjoyment.
Landlord hereby covenants and agrees that if Tenant shall perform all
the covenants and agreements herein stipulated to be performed on Tenant's
part, Tenant shall at all times during the term of this Lease have the
peaceable and quiet enjoyment and possession of the Premises without any manner
of let or hindrance from Landlord or any persons lawfully claiming under or
through Landlord.
22. Default by Landlord.
It shall be a default and breach of this Lease by Landlord if it shall
fail to perform or observe any term, condition, covenant or obligation required
to be performed or observed by it under this Lease for a period of thirty (30)
days after notice thereof from Tenant; provided, however, that if the term,
condition, covenant or obligation to be performed by Landlord is of such nature
that the same cannot reasonably be performed within such thirty (30)
day period, such default shall be deemed to have been cured if Landlord
commences such performance within said thirty (30) day period and thereafter
diligently undertakes to complete the same.
23. Notice and Place of Payment.
(a) All rent and other payments required to be made by Tenant to
Landlord shall be delivered or mailed to Landlord at the address set
forth below or any other address Landlord may specify from time to time
by written notice given to Tenant:
3330 W. Market Properties
55 South Miller Road
Akron, Ohio 44313
Attention: Mr. Dan Marchetta
(b) All payments required to be made by Landlord to Tenant shall
be delivered or mailed to Tenant at the address set forth in
Section 23(c) hereof or at any other address within the United States as
Tenant may specify from time to time by written notice given to Landlord.
(c) Any notice required or permitted to be given under this Lease
shall be deemed to have been given if reduced in writing and delivered in
person or mailed by registered or certified mail, return receipt
requested, postage prepaid, to the party who is to receive such notice at
the address set forth below. When so mailed, the notice shall be deemed
to have been given as of the date it was mailed.
Landlord: 3330 W. Market Properties
55 South Miller Road
Akron, Ohio 44313
Attention: Mr. Dan Marchetta
With a
copy to: Patrick J. Wack, Esq.
41 Merz Boulevard
Akron, Ohio 44313
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<PAGE> 18
Tenant: Telxon Corporation
3330 West Market Street
Akron, Ohio 44313-3352
Attention: President
With a
copy to: Goodman Weiss Freedman
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
Attention: Howard J. Freedman, Esq.
24. Miscellaneous General Provisions.
(a) Any amounts of money to be paid by Tenant to Landlord
pursuant to the provisions of this Lease, whether or not such payments
are denominated "rent" or "additional rent" and whether or not they are
to be periodic or recurring, shall be deemed "rent" or "additional rent"
for purposes of this Lease; and any failure to pay any of the same as
provided in this Lease shall entitle Landlord to exercise all of the
rights and remedies afforded hereby or by law for the collection and
enforcement of Tenant's obligation to pay rent. Tenant's obligation to
pay any such rent or additional rent pursuant to the provisions of this
Lease shall survive the expiration or other termination of this Lease and
the surrender of possession of the Premises after any holdover period.
(b) Tenant shall, within ten (10) days following receipt of a
written request from Landlord, execute, acknowledge and deliver to
Landlord or to any lender, purchaser or prospective lender or purchaser
designated by Landlord a written statement certifying (i) that this Lease
is in full force and effect and unmodified (or, if modified, stating the
nature of such modification), (ii) the date to which rent has been paid,
and (iii) that there are not, to Tenant's knowledge, any uncured defaults
(or specifying such defaults if any are claimed). Any such statement may
be relied upon by any prospective purchaser or mortgagee for all or any
part of the Buildings. Tenant's failure to deliver such statement within
such period shall be conclusive upon Tenant that this Lease is in full
force and effect and unmodified, and that there are no uncured defaults
in Landlord's performance hereunder.
(c) If requested by either party, a Memorandum of Lease,
containing the information required by Ohio law concerning this Lease
shall be prepared, executed by both parties and filed for record in the
office of the Recorder of Summit County, Ohio.
(d) Landlord and Tenant hereby represent and warrant that no real
estate broker or finder was involved in this transaction. Each party
hereto shall indemnify and hold harmless the other party for any and all
liability (and related expense, including reasonable attorneys' fees)
incurred in connection with the negotiation or execution of this Lease
for any real estate broker's commission or finder's fee which has been
earned by a real estate broker or other person on such party's behalf.
(e) This Lease is being executed and delivered by Landlord in the
State of Ohio and shall be construed and enforced in accordance with the
laws of that state.
(f) This Lease, including all Exhibits, constitutes the entire
agreement between the parties hereto and may not be modified except by an
instrument in writing executed by the parties hereto.
(g) This Lease and the respective rights and obligations of the
parties hereto shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto as well as the parties
themselves; provided, however, that Landlord, its successors and assigns
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<PAGE> 19
shall be obligated to perform Landlord's covenants under this Lease only
during and in respect of their successive periods as Landlord during the
term of this Lease.
(h) If any provision of this Lease shall be held to be invalid,
void or unenforceable, the remaining provisions hereof shall not be
affected or impaired, and such remaining provisions shall remain in full
force and effect.
(i) Landlord shall not, by virtue of the execution of this Lease
or the leasing of the Premises to Tenant, become or be deemed a partner
of Tenant in the conduct of Tenant's business on the Premises or
otherwise.
(j) As used in this Lease, the word "person" shall mean and
include, where appropriate, an individual, corporation, partnership or
other entity; the plural shall be substituted for the singular, and the
singular for the plural, where appropriate; and words of any gender shall
include any other gender. The topical headings of the several Sections
of this Lease are inserted only as a matter of convenience and reference,
and do not affect, define, limit or describe the scope or intent of this
Lease.
25. Option to Purchase.
Provided Tenant is not then materially in default of any of its
obligations under this Lease, Tenant shall have the right and option to
purchase the Buildings and the parcels of land included in the Premises, in
their entirety, together with all improvements and personal property owned by
Landlord thereon (the "Property"), for such purchase price as may be agreed
between Landlord and Tenant or, failing such agreement, within thirty (30) days
following Tenant's exercise of its option to purchase, for a price equal to the
fair market value of the Property as determined by two qualified professional
M.I.A. real estate appraisers, one of whom shall be selected by Landlord and
the other of whom shall be selected by Tenant. The appraisers thus selected
shall submit their respective appraisals to Landlord and Tenant not later than
thirty (30) days following their selection and, provided that such appraisals
do not vary from the average thereof by a factor of ten percent (10%) or more,
the purchase price shall be equal to the average of such appraisals. In the
event such appraisals vary from the average thereof by ten percent (10%) or
more, the two appraisers thus selected shall jointly select a third
qualified professional M.I.A. real estate appraiser, who shall within thirty
(30) days following his selection render his appraisal, which shall not be
greater than the higher appraisal theretofore rendered pursuant to this Section
nor lower than the lower appraisal theretofore rendered pursuant to this
Section, and the purchase price for the Property shall be equal to the average
of the three appraisals. Tenant may exercise such option by written notice to
Landlord at either of the following times: (a) not later than September 1,
1993, in which event such purchase would be consummated on or before December
31, 1993, and Tenant would reimburse Landlord for any mortgage prepayment or
assumption fees incurred by Landlord as a result of such purchase; or (b)
September 1, 2001, in which event such purchase would be consummated on or
before December 31, 2001.
Such purchase would be consummated by deposit with Chicago Title
Insurance Company ("Chicago Title") or such other title company or financial
institution as Tenant may select as escrow agent (the "Escrow Agent") of a
recordable limited warranty deed (or deeds), which conveys fee simple
marketable title to the Property to Tenant or its nominee free and clear of any
and all liens and encumbrances whatsoever, except (a) those certain matters set
forth in Schedule B, Section 2, Items 3,4,5,6,7, and 10 of Commitment for Title
Insurance No. AK-220,630 (effective date: December 22, 1986) issued by Chicago
Title, a copy of the pertinent part of which is attached hereto and made a part
hereof as Exhibit B; (b) those certain matters set forth in Schedule B,
Section 2, Items 4,5, and 6 of Commitment for Title Insurance No. AK-220,643
(effective date: December 22, 1986) issued by Chicago Title, a copy of the
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<PAGE> 20
pertinent part of which is attached hereto and made a part hereof as Exhibit C;
and (c) zoning and building ordinances, if any, and general real estate taxes
not then due and payable; such items to be deposited with the Escrow Agent not
later than fifteen (15) days prior to consummation of such purchase (the
"Closing"). In addition, not later than fifteen (15) days prior to the
Closing, Landlord shall deposit with the Escrow Agent an assignment to Tenant
of all existing leases affecting the Property, a copy of Landlord's closing
affidavit given to the Escrow Agent with respect to payment of bills for work
performed and materials furnished to the Property within ninety (90) days of
Closing, a certificate of Landlord that it is not a foreign person within the
meaning of Section 1445 of the Internal Revenue Code, a bill of sale to Tenant
for the personal property included in the Property, and such other and further
documents and instruments as may be reasonably requested by Tenant, all in form
reasonably satisfactory to Tenant. Closing shall be accomplished by and upon
the following: (a) deposit in escrow of all documents and funds respectively
required of Landlord and Tenant; (b) payment of the purchase price; (c)
issuance by the Escrow Agent of an Owner's Title of Insurance Policy in the
amount of the purchase price, insuring fee simple title ownership of the
Property as of the Closing to Tenant or its nominee, free and clear of any
liens and encumbrances whatsoever except those matters stated above; and (d)
disbursement to Landlord of the net amount due it after giving effect to the
following cost allocations: Landlord shall pay the premium for title insurance
to the extent of the premium for a title guarantee in the same amount, and
Tenant shall pay the balance of such premium; real estate taxes shall be
apportioned as of the date of transfer of title according to the calendar year,
using the last available County Treasurer's tax duplicate for the purpose of
closing the escrow, with any current assessments, re-assessed assessments
and/or re-spread taxes upon the Premises to be paid out of Landlord's funds at
Closing; Tenant shall pay one-half (1/2) of the escrow fees and all recording
fees; Landlord shall pay real property conveyance fees and one-half (1/2) the
escrow fees; rents receivable, security deposits, utility and service contract
charges, and accounts payable and leasing commissions shall be equitably
adjusted as of the Closing by Landlord and Tenant.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first above written:
Witnesses as to Landlord: LANDLORD: 3330 W. MARKET PROPERTIES
/s/ Patrick J. Wack By: /s/ Dan Marchetta
/s/ Gerald J. Gabriel General Partner
Witnesses as to Tenant: TENANT: TELXON CORPORATION
/s/ Patrick J. Wack By: /s/ Eugene A. Novak
/s/ Gerald J. Gabriel Vice President
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<PAGE> 21
STATE OF OHIO )
) SS
COUNTY OF SUMMIT )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared the above named , to me known to be
the person who executed the within and foregoing instrument, who acknowledged
that he is duly authorized to execute such instrument on behalf of 3330 W.
Market Properties, that he did execute said instrument on behalf of said
partnership and that the same is his free and voluntary act and deed as General
Partner of said partnership and is the free and voluntary act and deed of said
partnership for the uses and purposes therein set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Akron, Ohio, this 16th day of March, 1987.
/s/ Howard J. Freedman
Notary Public
STATE OF OHIO )
) SS
COUNTY OF SUMMIT )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared the above named Eugene A. Novak, known to me to be the Vice President
of Telxon Corporation, the corporation which executed the foregoing instrument,
who acknowledged that he did sign and seal the foregoing instrument for, and on
behalf of said corporation, being thereunto duly authorized by its Board of
Directors, that the same is his free act and deed as such officer and the free
act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Akron, Ohio, this 16th day of March, 1987.
/s/ Howard J. Freedman
Notary Public
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<PAGE> 22
LEGAL DESCRIPTION
PARCEL I:
Situated in the City of Fairlawn, County of Summit and State of Ohio: and
known as being part of Lot 4, formerly Copley Township, and more fully
described as follows:
Beginning at the point of intersection of the East line of Fairlawn
Village Heights Estates, as recorded in Plat Book 62, Page 18 of the Summit
County Records of Plats, produced northerly and the original centerline of
West Market Street;
thence S. 58 deg. 23' 30" E. along the said original centerline, 378.00
feet to the true place of beginning;
thence continuing S. 58 deg. 23' 30" E. along said original centerline,
150.00 feet to a point;
thence S. 31 deg. 36' 10" W., 435.60 feet to an I.P.;
thence S. 58 deg. 23' 30" E., 115.67 feet to an I.P.;
thence S. 31 deg. 36' 30" W., 150.00 feet to an I.P.;
thence N. 58 deg. 23' 30" W. along the northerly line of land conveyed
to the First Universalist Church of Akron and recorded in Volume 3585, Page
548, Summit County Records, 282.45 feet to an I.P. on the southerly extension
of the Easterly line of said Fairlawn Village Heights Estates;
thence N. 00 deg. 09' 52" W. along the Easterly line of said Fairlawn
Village Heights Estates and the southerly extension thereof, 118.69 feet to
an I.P. at the southwesterly corner of land conveyed to William D. DeVere
and Mary Ann DeVere and recorded in Volume 4931, Page 9 of the Summit County
Records;
thence N. 89 deg. 50' 08" E. along the southerly line of said DeVere
parcel, 93.25 feet to an I.P. at the southeasterly corner of said DeVere
parcel;
thence N. 31 deg. 36' 10" E. along the easterly line of said DeVere
parcel, 435.60 feet to the true place of beginning, as surveyed by Charles
J. Messmore, Registered Surveyor, in December, 1978, but subject to all
legal roads and highways.
PARCEL II:
Situated--in the City of Fairlawn, County of Summit and State of Ohio, and
known as being part of Lot 4, formerly Copley Township, and being more fully
described as follows:
Beginning at the intersection of the original Centerline of West Market
Street and the Westerly line of Morewood Road, as dedicated in Plat Book 49,
Page 73 of the Summit County Record of Plats; Thence S. 31 deg. 36' 30" W.,
along said Westerly Street line, 435.60 feet to an I. P.; Thence N. 58 deg.
23' 30" W., 518.69 feet to an I. P. at the Southeasterly corner of land
conveyed to No. 547 Building Company by Deed dated June 8, 1972 and recorded
in Volume 4071, Page 644 of the Summit County Record of Deeds: Thence N. 31
deg. 36' 10" E., along the Easterly line of land so conveyed to No. 547
Building Company, 435.60 feet to a point on the original centerline of said
West Market Street (and passing through an I. P. set at 405.60 feet), said
point being S. 58 deg. 23' 30" E., 528.00 feet along said original centerline
from its intersection with the East line of Fairlawn Village Heights Estates,
as recorded in Plat Book 62, Page 18 of the Summit County Record of Plats;
Thence S. 58 deg. 23' 30" E., along said original street centerline, 518.72
feet to the place of beginning.
Exhibit A
Page 1 of 2
<PAGE> 23
Exhibit A
Page 1 of 2
<PAGE> 24
Situated in the City of Fairlawn, County of Summit and State of
Ohio and known as being part of Lot 4, formerly Copley Township, and
more fully described as follows:
(forward)
(SCHEDULE A continued)
Beginning at a point on the Westerly line of Morewood Road as
dedicated in Plat Book 49, Page 73, of the Summit County Record of
Plats, said point being S 31 deg. 36' 30" W along said line 435.60
feet from its intersection with the original centerline of West
Market Street:
Thence S 31 deg. 36' 30" W along said street line 150.00 feet
to an I.P.;
Thence N 58 deg. 23' 30" W, 403.02 feet to an I.P.;
Thence N 31 deg. 36' 30" E, 150.00 feet to an I.P.;
Thence S 58 deg. 23' 30" E, 403.02 feet to the place of beginning,
as surveyed by Messmore & Fay, Registered Surveyors, in March, 1978.
EXHIBIT 1
Page 2 of 2
<PAGE> 25
SCHEDULE B--continued
Number
AK-220,630 Page 1
SCHEDULE B - Section 2
Schedule B of the policy or policies to be issued will contain
exceptions to the following matters unless the same are disposed of to
the satisfaction of the Company.
1. Defects, liens, encumbrances, adverse claims or other matters, if any,
created first appearing in the public records or attaching subsequent to the
effective date hereof but prior to the date the proposed Insured acquires for
value of record the estate or interest or mortgage thereon covered by this
Commitment.
2. Any owner's policy issued pursuant hereto will contain under Schedule B
the standard exceptions set forth at the inside cover hereof. Any loan policy
will contain under Schedule B standard Exceptions 1, 2 and 3 unless a
satisfactory survey and inspection of the premises is made.
3. Restrictions and Reservations contained in the Warranty Deed from
Dorothy Braden Packard Smith to Blanche L. Hart, dated May 11, 1939, filed
for record May 16, 1939 at 9:40 A. M. and being recorded in Volume 1775,
Page 20 of Summit County Records, conveying a part of Parcel II of premises
described in Schedule C.
See Exhibit A attached hereto and made a part hereof.
Note: By the Dedication Plan of Moorewood Road filed for record July
1, 1957, at 1:05 P. M. and recorded in Plat Book 49, Page 73 of Summit County
Records, the Southeasterly 25 feet of the 35 feet reserved for street purposes
in the above deed was dedicated to the Public use for Highway purposes.
Note: Said restrictions contain no forfeiture clause and a violation
thereof would not work a forfeiture or reversion of title.
Note: This company insures against loss by reason of the present violation
of the restrictions.
RB:eb
EXHIBIT B
Page 1 of 2
<PAGE> 26
Number AK-220,630 Page 2
4. An Electric Distribution Easement from Blanche L. Hart and Clarence
W. Hart, to Ohio Edison Company, dated November 29, 1960, filed for record
December 19, 1960 at 10:21 A. M. and being recorded in Volume 3905, Page
221 of Summit County Records, for lines for the distribution of electric
current, including telephone and telegraph.
See Exhibit B attached hereto and made a part hereof.
5. An Underground Distribution Easement from Simon Joint Venture
IV to Ohio Edison Company, dated January 10, 1980, filed for record January
22, 1980 at 8:49 A. M. and being recorded in Volume 6333, Page 33 of
Summit County Records, for Distribution of electric current and the
operation of telephone and telegraph lines.
See Exhibit C attached hereto and made a part hereof.
6. Memorandum of Lease by and among Prudential Insurance Company
of America a New Jersey corporation and Simon & Company, an Ohio General
Partnership DBA Simon Joint Venture IV Landlord and Telxon Corporation
a Delaware Corporation, Tenant, dated June 4, 1981,1 filed for record
July 29, 1981 at 9:02 A. M. and recorded in Volume 6476, Page 170 of
Summit County Records.
Term 5 years commencing on the First Day of the calendar month succeed-
ing the date construction is substantially completed with an option of
1 renewal term of 5 years.
See Exhibit D attached hereto and made a part hereof.
7. Amendment to Memorandum of Lease by and among Prudential Insurance
Company of America, a New Jersey Corporation and Simon & Company an Ohio
General Partnership DBA Simon Joint Venture IV Landlord and Telxon Corporation
a Delaware Corporation, Tenant, dated May 15, 1982 filed for record May
20, 1982 at 9:40 A. M. and recorded in Volume 6554, Page 499 of Summit
County Records.
See Exhibit E attached hereto and made a part hereof.
8. Mortgage for $4,740,000.00 from Simon Joint Venture IV, an Ohio
Partnership to The Prudential Insurance Company of America, dated June
4, 1986, filed for record June 4, 1979 at 10:41 A. M. and being recorded
in Volume 6271, Page 587 of Summit County Records.
See Exhibit F attached hereto and made a part hereof.
9. Conditional Assignment of Rentals from Simon Joint Venture IV
an Ohio Partnership to The Prudential Insurance Company of America, dated
June 4, 1979, filed for record June 4, 1979 at 10:43 A. M. recorded in
Volume 6226, Page 59 of Summit County Records, in the amount of $4,740,000.00.
See Exhibit G attached hereto and made a part hereof.
10. Subject to two 0.5' curb encroachments from the most Southerly
side of Parcel I of caption premises upon the premises adjoining caption
and a 6.55' encroachment of a 2' in diameter catch basin from a storm
conduit on the Southwesterly side of Parcel II of caption premises upon
the premises adjoining caption as disclosed by Survey provided by C.
J. Messmore & Associates, Inc. by Registered Surveyor C. J. Messmore
#4512 Registered Surveyor.
EXHIBIT B
Page 2 of 2
<PAGE> 27
Number AK-220,643 Page 2
4. Restrictions and Reservations as contained in the Warranty Deed from
Dorothy B. Smith to Blanche L. Hart, dated February 27, 1945, filed for
record on April 10, 1945 at 10:27 A.M., and recorded in Volume 2162,
Page 445 of Summit County Records, conveying premises described in Schedule
C.
See Exhibit A attached hereto and made a part hereof.
NOTE: By the Dedication Plan of Morewood Road, filed for record on
July 1, 1957 at 1:05 P.M., and recorded in Plat Book 49, Page 73 of
Summit County Records, the Southeasterly 25 feet of the 35 feet reserved
for street purposes in the above deed was dedicated to the Public Use
for Highway Purposes.
5. Easement and Right of Way for distribution of electric current, in-
cluding telephone and telegraph, from Blanche L. Hart and Clarence W.
Hart to Ohio Edison Company, dated November 29, 1960, filed for record
on December 19, 1960 at 10:21 A.M., and recorded in Volume 3905, Page
271 of Summit County Records.
See Exhibit B attached hereto and made a part hereof.
EXHIBIT C
Page 1 of 2
<PAGE> 28
Number AK-220,643 (SCHEDULE B continued) Page 3
6. There are no Special Taxes or Assessments charged against premises
described in Schedule C, except an assessment for Sewer Maintenance
which is payable in semi-annual installments of $27.00 each for the
year through 1986.
No examination has been made for Special Taxes or Assessments
which have not been certified to the County Auditor.
7. Premises described in Schedule C, are listed for Taxation on the
1986 Duplicate, Fairlawn City, in the name of Simon Joint Venture
IV.
PM No. 09-00509
PPN CP-0005-02-002
Lot 4 W of Morewood Rd
Special Assessments for the first half 1986 amounting to $27.00
are a lien due and payable.
Taxes for the first half 1986, $1,369.55
920 Credit 347.58
Roll Back Credit 102.20
Adjusted Tax $ 919.77 are a lien due and
payable.
Taxes and Assessments for the last half 1986 are a lien not yet
due and payable.
Taxes and Assessments for the year 1987, amount not yet determined,
are a lien not yet due and payable.
Additions or abatements which may hereafter be made by legally
constituted authorities as provided for in Chapter 5713 of the Ohio
Revised Code.
EXHIBIT C
Page 2 of 2
<PAGE> 29
L E A S E A G R E E M E N T
STATE OF TEXAS
COUNTY OF HARRIS
This Lease Agreement, made and entered into by and between
SOUTHWEST BUSINESS PROPERTIES, INC. hereinafter referred to as
"Landlord" and TELXON CORPORATION, hereinafter referred to as "Tenant";
W I T N E S S E T H:
PREMISES
AND
TERM
1. In consideration of the obligation of Tenant to pay
rent as herein provided, and in consideration of the other terms,
provisions and covenants hereof, Landlord hereby demises and leases to
Tenant, and Tenant hereby takes from Landlord certain premises situated
within the County of Harris, State of Texas, more particularly
described as follows:
10,470 square feet of office/warehouse facility outlined in
"red" on exhibit "B" attached hereto and for all purposes
made a part hereof, located in building "C" of West Loop
Business Plaza, a project containing 125,300 square feet of
leasable space, situated on a 7.0684 acre tract of land in
the John Reinerman Survey, Abstract No. 642, City of
Houston, Harris County, Texas and more particularly
described in Exhibit "A" attached hereto and for all
purposes made a part hereof. The street address is 7280
Wynnwood, Suite 137, 77008,
together with and subject to all rights, privileges, easements,
appurtenances and immunities belonging to or in any way pertaining to
the said premises and together with the buildings and other
improvements erected or to be erected upon said premises (the said real
property and the buildings and improvements thereon being hereafter
referred to as the "premises").
To Have and to Hold the same for a term commencing on
April 1, 1991 and ending twenty-four (24) months thereafter,
Page 1
<PAGE> 30
except that in the event the "commencement date" is a date other than
the first day of calendar month, said term shall extend for said
number of months in addition to the remainder of the calendar month
following the "occupancy date".
Taking possession by Tenant shall be deemed conclusively to establish
that said buildings and other improvements have been completed in
accordance with the plans and specifications and that the premises are
in good and satisfactory condition, as of when possession was so
taken. At any time and from time to time after the completion date
Tenant shall, upon demand, execute and deliver to Landlord or
Landlord's mortgagee a letter of acceptance of delivery of the premises
and such other certificates as may be required, including Estoppel
Certificates.
RENT
2. Tenant agrees to pay to Landlord rent, without
deduction or set off, for the entire term hereof for said premises at
the rate of THREE THOUSAND TWO HUNDRED THIRTY-ONE AND NO/100 DOLLARS
($3,321.00.) per month, which sums shall be payable in Houston, Harris
County, Texas. One such monthly installment shall be due and payable
without demand on or before the first day of each succeeding calendar
month during the hereby demised term; provided that if the
"commencement date" should be a date other than the first day of a
calendar month, there shall be due and payable on the "commencement
date," as rent for the balance of the calendar month during which the
"commencement date" shall fall, a sum equal to that proportion of the
rent for a full month as herein provided which the number of days from
the "commencement date" to the end of the calendar month during which
the "commencement date" shall fall bears to the total number of days in
such month, and all succeeding installments of rent shall be payable on
or before the first day of each succeeding calendar month during the
hereby demised term as first above provided. In addition, Tenant
agrees to deposit with Landlord on the date hereof the sum
of N/A , which sum shall be
held by Landlord, without obligation for interest, as security for the
performance of Tenant's covenants and obligations under this lease, it
being expressly understood and agreed that such deposit is not an
advance rental deposit or a measure of Landlord's damages in case of
Tenant's default. Upon the occurrence of any event of default by
Tenant, Landlord may, from time to time, without prejudice to any other
remedy provided herein or provided by law, use such fund to the extent
necessary to make good any arrears of rent and any other damage,
injury, expense or liability caused by such event of default; and
Tenant shall pay to Landlord on demand the amount so applied in order
to restore the security deposit to its original
Page 2
<PAGE> 31
Amount. If Tenant is not then in default hereunder, any remaining
balance of such deposit shall be returned by Landlord to Tenant on or
before thirty (30) days after the termination of this lease.
BUILDING
3. All buildings and other improvements to be erected on
the premises shall in every respect comply with all governmental laws,
ordinances, regulations, and other requirements which may govern
construction of the same, at the time said buildings and other
improvements are completed and occupied by the Tenant.
USE
4. The demised premises shall be used only for office
space and for the purpose of receiving, storing, shipping,
manufacturing and selling (other than retail) products, materials and
merchandise made and/or distributed by Tenant and for such other lawful
purposes as may be incidental thereto. Tenant shall at its own cost
and expense obtain any and all licenses and permits necessary for any
such use. Tenant shall comply with all governmental laws, ordinances
and regulations applicable to the use of the premises, and shall
promptly comply with all governmental orders and directives for the
correction, prevention and abatement of nuisances in, upon, or
connected with the premises, all at Tenant's sole expense. Without
Landlord's prior written consent, Tenant shall not receive, store or
otherwise handle any product, material or merchandise which is
explosive or highly inflammable. Tenant will not permit the premises
to be used for any purpose which would render the insurance thereon
void or the insurance risk more hazardous. Should there be any
increase in either or both the building or contents insurance, any
Tenant causing such increase in insurance cost does agree to bear the
increase on both the building insurance as well as that on any other
Tenant's contents insurance. Tenant shall have the right of ingress
and egress to and from the leased premises as may be reasonably
necessary to conduct Tenant's business, and which does not unreasonably
interfere with the conduct of the business of any other Tenant on the
property of which the leased premises are a part.
TAXES
5. A. Subject to the provisions of Subparagraph B
below, Landlord agrees to pay before they become delinquent all taxes
(both general and special), assessments or governmental charges
(hereinafter collectively referred to as "taxes") lawfully levied or
assessed against the premises or any part thereof; provided, however,
Page 3
<PAGE> 32
Landlord may, at its sole cost and expense (in its own name or in the
name of both, as it may deem appropriate) dispute and contest the same,
and in such case, such disputed item need not be paid until finally
adjudged to be valid. At the conclusion of such contest, Landlord
shall pay the items contested to the extent that they are held valid,
together with all items, court costs, interests and penalties relating
thereto.
B. If after 1991 or during any subsequent real
estate tax year of the primary term of this lease or any renewal or
extension thereof, the real estate taxes (both general and special),
assessments and governmental charges levied or assessed against the
demised premises for such tax year shall be greater than the real
estate taxes, assessments and governmental charges levied or assessed
against the demised premises for 1991 Tenant shall pay to Landlord, as
additional rental, upon demand, Tenants proportionate share of such
excess. Any payment to be made pursuant to this Section B with respect
to the real estate tax year in which this lease terminates shall bear
the same ratio to the payment which would be required to be made for
the full tax year as that part of such tax year which elapses prior to
termination of this lease bears to a full tax year. (See Exhibit "C",
paragraph 26.A,I).
LANDLORDS REPAIRS
6. Landlord shall at his expense maintain only the roof,
foundation, structural soundness of the exterior walls of the building
in good repair, reasonable wear and tear excepted. Tenant shall repair
and pay for any damage caused by the negligence of Tenant, or Tenant's
employees, agents or invitees, or caused by Tenant's default hereunder.
The term "walls" as used herein shall not include windows, glass, doors
or special store fronts. Tenant shall immediately give Landlord
written notice of defect or need for repairs, after which Landlord
shall have reasonable opportunity to repair same or cure such defect.
Landlord's liability hereunder shall be limited to the cost of such
repairs or curing such defect. In the event the plans and
specifications provide for an air-conditioning system for the premises,
then Landlord represents that on commencement date such
air-conditioning system shall be in good operating condition; provided,
however, that during the term of this lease Tenant shall at its own
cost and expense maintain such system in good operating condition,
shall make all necessary repairs and replacements and upon termination
of this lease shall deliver such system to Landlord in good operating
condition. Landlord shall care for the grounds around the buildings on
the premises, including the mowing of grass, care of shrubs, and
general
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<PAGE> 33
landscaping, and maintain common roadways and parking facilities of the
area. (See Exhibit "C", paragraph 26.A. I & II).
TENANT REPAIRS
7. Tenant shall at its own cost and expense keep all other
parts of the premises, including but not limited to windows, glass and
plate glass, doors, any special store front, interior walls, and finish
work, floors and floor covering, gutters, heating and air conditioning
systems, dock boards, plumbing work and fixtures, and shall take good
care of the premises and its fixtures and suffer no waste. Tenant will
keep the parking areas, driveways and alleys and the whole of the
premises in a clean and sanitary condition. Tenant shall furnish all
janitorial services and supplies required or used on the leased
premises. Tenant shall not be obligated to repair any damage caused by
fire, tornado or other casualty covered by items set forth under the
fire and extended coverage provisions of Landlord's fire insurance
policy. In the event the premises are served by rail track or spur
track, then the Tenant, notwithstanding the provisions of any rail
track agreements to the contrary, shall be liable and responsible for
maintaining or reimbursing the rail carrier or Landlord for the
maintenance of the portion of the track and related facilities adjacent
to the premises.
In the event Tenant falls to make any repairs required by it under
this lease, Landlord shall have the option, but no obligation, to make
said repairs and Tenant shall be liable for all sums so advanced by
Landlord upon demand, plus interest at ten percent (10%) per annum.
(See Exhibit "C" paragraph 26.A. I & II).
ALTERATIONS
8. Tenant shall not make any alterations, additions or
improvements to the premises without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or
delayed. Tenant may, without the consent of Landlord, but at its own
cost and expense and in a good workmanlike manner, make such minor
alterations, additions or improvements, or erect such shelves, bins,
machinery and trade fixtures as it may deem advisable, without altering
the basic character of the building or improvements and without
overloading or damaging such building or improvements, and in each case
complying with all applicable governmental laws, ordinances,
regulations, and other requirements. At the termination of this lease,
Tenant shall, if Landlord so elects, remove all alterations, additions,
and improvements, and restore the premises to their original condition;
otherwise such improvements shall be delivered up to the Landlord with
Page 5
<PAGE> 34
the premises. Provided Tenant is not in default, all shelves, bins,
machinery and trade fixtures installed by Tenant may be removed by
Tenant at the termination of this lease if Tenant so elects, and shall
be removed if required by Landlord. All such removals and restoration
shall be accomplished in a good workmanlike manner so as not to damage
the primary structure or structural qualities of the buildings and
other improvements situated on the premises.
SIGNS
9. Tenant shall have the right to install signs upon the
exterior of said buildings only when first approved in writing by
Landlord, which approval shall not be unreasonably withheld or delayed,
and subject to any applicable governmental laws, ordinances,
regulations and other requirements. Tenant shall remove all such signs
at the termination of this lease. Such installations and removals
shall be made in such manner as to avoid injury or defacement of the
building and other improvements.
INSPECTION
10. Landlord and Landlord's mortgagee and their respective
agents and representatives shall have the right to enter and inspect
the premises at any time during reasonable business hours, for the
purpose of ascertaining the condition of the premises or in order to
make such repairs as may be required to be made by the Landlord under
the terms of this lease. During the period that is four months prior
to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the premises at any time
during reasonable business hours for the purpose of showing the
premises to prospective tenants or purchasers and shall have the right
to erect on the premises a suitable sign indicating that the premises
are for sale or lease.
UTILITIES
11. Landlord agrees to provide at its cost, water, normal
electricity and telephone service connections into the premises; but
Tenant shall pay all charges incurred for any utility services used on
or from the premises and any maintenance charges for utilities.
Landlord shall in no event be liable for any interruption or failure of
utility services on the premises. (See Exhibit "C" paragraph 26.A I and
II).
ASSIGNMENT
AND SUBLETTING
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<PAGE> 35
12. Tenant shall not have the right to assign this lease
or to sublet the whole or any part of the premises, without the prior
written consent of the Landlord, which consent shall not be
unreasonably withheld, notwithstanding any permitted assignment or
subletting, Tenant shall at all times remain fully responsible and
liable for the payment of the rent herein specified and for compliance
with all of the other obligations under the terms, provisions and
covenants of this lease. Upon the occurrence of an "event of default"
as hereinafter defined, if the premises or any any part thereof are
then assigned or sublet, Landlord in addition to any other remedies
herein provided, or provided by law, may at its option collect directly
from such assignee or subtenant all rents becoming due to Tenant under
such assignment or sublease and apply such rent against any sums due to
it by Tenant hereunder, and no such collection shall be construed to
constitute a novation or a release of Tenant from the further
performance of its obligations hereunder. Landlord shall have the
right to assign any of its rights under this lease.
FIRE AND
CASUALTY
DAMAGE
13. A. If the buildings situated on the premises should
be damaged or destroyed by fire, tornado, or other casualty, Tenant
shall give immediate written notice thereof to Landlord.
B. If the buildings situated on the premises should
be totally destroyed by fire, tornado, or other casualty, or if they
should be so damaged that rebuilding or repairs cannot be completed
within one hundred eighty (180) days after the date upon which Landlord
is notified by Tenant of such damage, this lease shall terminate and
the rent shall be abated during the unexpired portion of this lease,
effective upon the date of the occurrence of such damage.
C. If the buildings situated on the premises should
be damaged by fire, tornado, or other casualty, but only to such extent
that rebuilding or repairs can be completed within one hundred eighty
(180) days after the date upon which Landlord is notified by Tenant of
such damage, this lease shall not terminate, but Landlord shall at its
sole cost and expense proceed with reasonable diligence to rebuild and
repair such buildings, to substantially the condition in which they
existed prior to such damage, except that Landlord shall not be
required to rebuild, repair or replace any part of the partitions,
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<PAGE> 36
fixtures and other improvements which may have been placed on the
premises by Tenant. If the premises are untenantable in whole or part
following the damage, the rent payable hereunder during the period in
which they are untenantable shall be reduced to such extent as may be
fair and reasonable under all of the circumstances; In the event that
Landlord should fail to complete such repairs and rebuilding within one
hundred eighty (180) days after the date upon which Landlord is
notified by Tenant of such damage, Tenant may be at its option
terminate this lease by delivering written notice of termination to
Landlord as Tenant's exclusive remedy, whereupon all rights and
obligations hereunder shall cease and determine.
D. Notwithstanding anything herein to the contrary,
in the event the holder of any indebtedness secured by a mortgage or
deed of trust covering the premises requires that the insurance
proceeds be applied to such indebtedness, then Landlord shall have the
right to terminate this lease by delivering written notice of
termination to Tenant, whereupon all rights and obligations hereunder
shall cease and determine.
E. Any insurance which may be carried by Landlord or
Tenant against loss or damage to the buildings and other improvements
situated on the premises shall be for the sole benefit of the party
carrying such insurance and under its sole control.
F. Each of Landlord and Tenant hereby releases the
other from any and all liability or responsibility to the other or
anyone claiming through or under them by way of subrogation or
otherwise for any loss or damage to property caused by fire or any of
the extended coverage casualties covered by the insurance maintained
hereunder, even if such fire or other casualty shall have been caused
by the fault or negligence of the other party, or anyone for whom such
party may be responsible; provided, however, that this release shall
be applicable and in force and effect only with respect to loss or
damage occurring during such times as the releasor's policies shall
contain a clause or endorsement to the effect that any release shall
not adversely affect or impair said policies or prejudice the right of
the releasor to recover thereunder. Each of Landlord and Tenant agrees
that it will request its insurance carriers to include in its policies
such a clause or endorsement. If extra cost shall be charged therefor,
each party shall advise the other thereof and of the amount of the
extra cost, and the other party, at its election, may pay the same, but
shall not be obligated to do so.
G. Landlord covenants and agrees to maintain standard
fire and extended coverage insurance covering the building on the
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<PAGE> 37
premises in an amount not less than eighty per cent (80%) of the
replacement cost thereof. If during any subsequent year of the primary
term or any renewal or extension, the insurance premiums for the fire
and extended insurance carried by Landlord shall exceed the premium for
such insurance for 1991, Tenant shall pay to Landlord on demand It's
prorated share of such excess; and the failure to pay such excess upon
demand shall be treated in the same manner as a default in the payment
of rent hereunder when due. (See Exhibit "C" paragraph 26.A.I).
LIABILITY
14. A. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person
whomsoever, for any injury to person or damage to property on or about
the premises, caused by the negligence or misconduct of of Tenant, its
agents, servants or employees, or of any other person entering upon the
premises under express or implied invitation of Tenant, or caused by
the buildings and improvements located on the premises becoming out of
repair, or caused by leakage of gas, oil, water or steam or by
electricity emanating from the premises, or due to any cause
whatsoever, and Tenant agrees to defend and indemnify Landlord and hold
it harmless from any loss, expense or claim, including attorneys' fees,
arising out of any such damage or injury; except that any injury to
person or damage to property caused by the negligence of Landlord or by
the failure of Landlord to repair and maintain that part of the
premises which Landlord is obligated to repair and maintain, after the
receipt of written notice from Tenant of needed repairs or of defects,
shall be the liability of Landlord and not of Tenant.
B. Tenant agrees that at all times during the lease
term, or any renewals, it will maintain in force public liability
insurance and property damage insurance, insuring both Landlord and
Tenant against all claims or action arising out of or in connection
with Tenant's use or occupancy of the demised premises. Policy or
policies to be in the amounts not less than one hundred thousand
dollars ($100,000.00) in respect of injuries or death of any one
person, three hundred thousand dollars ($300,000.00) in respect of any
one accident or disaster, and fifty thousand dollars ($50,000.00) in
respect to property damaged or destroyed.
C. All policies of insurance required to be
maintained by Tenant under the provisions of this paragraph shall be
written by a solvent insurance company, acceptable to Landlord, and
which is duly licensed to issue such policies in the State and County
where the demised premises are located. Said policies shall provide
for at least thirty (30) days written notice to Landlord by the Insurer
or Insurers prior to cancellation. Tenant shall promptly cause a
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certificate or certificates of such insurance to be delivered to
Landlord and certificates evidencing the renewals thereof shall be
delivered at least thirty (30) days prior to the expiration of the
respective policy terms. If Tenant should fail to comply with the
foregoing requirements relating to insurance, Landlord may obtain such
insurance, and Tenant shall pay to Landlord on demand, as additional
rental hereunder, the premium cost thereof plus interest at the rate of
ten per cent (10%) per year from the date of payment by Landlord until
repaid to Landlord by Tenant.
CONDEMNATION
15. A. If the whole or any substantial part of the
premises should be taken for any public or quasi-public use under
governmental law, ordinance or regulation, or by right of eminent
domain, or by private purchase in lieu thereof, this lease shall
terminate and the rent shall be abated during the unexpired portion of
this lease, effective when the physical taking of said premises shall
occur.
B. If less than a substantial part of the premises
shall be taken for any public or quasi-public use under any
governmental law, ordinance or regulation, or by right of eminent
domain, or by private purchase in lieu thereof, this lease shall not
terminate, but rent payable hereunder during the unexpired portion of
this lease shall be reduced to such extent as may be fair and
reasonable under all of the circumstances.
C. In the event of any such taking or private
purchase in lieu thereof, Landlord and Tenant shall each be entitled to
receive and retain such separate awards and/or portion of lump sum
awards as may be allocated to their respective interests in any
condemnation proceedings.
HOLDING
OVER
16. Should Tenant, or any of its successors in interest,
hold over the premises, or any part thereof, after the expiration of
the term of this lease, unless otherwise agreed in writing, such
holding over shall constitute and be construed as tenancy from month to
month only, at a rental equal to the rental payable for the last month
of the term of this lease plus thirty per cent (30%) of such amount.
The inclusion of the preceding sentence shall not be construed as
Landlord's permission for Tenant to hold over.
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QUIET
ENJOYMENT
17. Landlord covenants that it now has, or will acquire
before Tenant takes possession of the premises, good title to the
premises, free and clear of all liens and encumbrances, excepting only
the lien for current taxes not yet due, such mortgage or mortgages as
are permitted by the terms of this lease, zoning ordinances and other
building and fire ordinances and governmental regulations relating to
the use of such property, and easements, restrictions and other
conditions of record. In the event this lease is a sublease, then
Tenant agrees to take the premises subject to the provisions of the
prior leases. Landlord represents and warrants that it has full right
and authority to enter into this lease and that Tenant, upon paying the
rental herein set forth and performing its other covenants and
agreements herein set forth, shall peaceably and quietly have, hold and
enjoy the premises for the term hereof without hindrance or molestation
from Landlord, subject to the terms and provisions of this lease.
EVENTS OF DEFAULT
18. Each of the following acts or omissions of Tenant or
occurrences shall constitute an "Event of Default":
A. Failure or refusal by Tenant to timely pay rent or
other payments hereunder:
B. Failure to perform or observe any other covenant
or condition of this Lease by Tenant to be performed or observed upon
the expiration of a period of ten (10) days following written notice to
Tenant of such failure:
C. Abandonment or vacating of the leased premises or
any significant portion thereof;
D. The filing or execution or occurrence of: a
petition in bankruptcy or other insolvency proceeding by or against
Tenant; or petition or answer seeking relief under any provision of the
Bankruptcy Act; or an assignment for the benefit of creditors or
composition; or a petition or other proceeding by or against the Tenant
for the appointment of a trustee, receiver or liquidator of Tenant or
any of Tenant's property or a proceeding by any governmental authority
for the dissolution or liquidation of Tenant.
REMEDIES
19. A. Upon the occurrence of any Event of Default, as
enumerated above, Landlord may, at Landlord's option, in addition to
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any other remedy or right given hereunder or by law or equity, do any
one or more of the following:
(1) Terminate this lease, in which event, Tenant
shall immediately surrender possession of the premises to Landlord;
(2) Enter upon and take possession of the leased
premises and expel or remove Tenant and any other occupant therefrom,
with or without having terminated the lease;
(3) Alter locks and other security devices at the
leased premises.
B. Exercise by Landlord of any one or more remedies
hereunder granted or otherwise available shall not be deemed to be an
acceptance of surrender of the premises by Tenant, whether by agreement
or by operation of law, it being understood that such surrender can be
effected only by the written agreement of Landlord and Tenant. No such
alteration of security devices and no removal or other exercise of
dominion by Landlord over the property of Tenant or others at the
leased premises shall be deemed unauthorized or constitute a
conversion, Tenant hereby consenting, after any Event of Default, to
the aforesaid exercise of dominion over Tenant's property within the
building. All claims for damages by reason of such re-entry and/or
repossession and/or alteration of locks or other security devices are
hereby waived, as are all claims for damaged by reason of any distress
warrant, forcible detainer proceedings, sequestration proceedings or
other legal process. Tenant agrees that any re-entry by Landlord shall
be pursuant to judgment obtained in forcible detainer proceedings or
other legal proceedings,as Landlord may elect, and Landlord shall not
be liable in trespass or otherwise.
C. In the event Landlord elects to terminate the
lease by reason of an Event of Default then notwithstanding such
termination, Tenant shall be liable for and shall pay to Landlord, at
Houston, Texas, the sum of all rent and other indebtedness accrued to
the date of such termination, plus, as damages, an amount equal to the
then present value of the rent reserved hereunder for the remaining
portion of the lease term (had such term not been terminated by
Landlord prior to the date of expiration stated in Paragraph 1), less
the then present value of the then fair rental value of the leased
premises for such period; the undersigned parties here stipulating that
such fair rental value shall in no event be deemed to exceed sixty per
cent (60%) of the then present value of the rent reserved for such
period.
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D. In the event that Landlord elects to repossess the
premises without terminating the lease, then Tenant shall be liable for
and shall pay to Landlord at Houston, Texas, all rent and other
indebtedness accrued to the date of such repossession, plus rent
required to be paid by Tenant to Landlord during the remainder of the
lease term until the date of expiration of the term as stated in
Paragraph 1, diminished by any net sums thereafter received by Landlord
through reletting the leased premises during said period (after
deducting expenses incurred by Landlord as provided in Paragraph E).
In no event shall Tenant be entitled to any excess of any rent obtained
by reletting over and above the rent herein reserved. Actions to
collect amounts due by Tenant as provided in this Paragraph 19 may be
brought from time to time, on one or more occasions, without the
necessity of Landlord's waiting until expiration of the lease term.
E. In the case of an Event of Default, Tenant shall
also be liable for and shall pay to Landlord, at Houston, Texas, in
addition to any sum provided to be paid above, broker's fees incurred
by Landlord in connection with re-letting the whole or any part of the
premises; the costs of removing and storing Tenant's or other
occupant's property; the costs of repairing, altering, remodeling or
otherwise putting the leased premises into condition acceptable to a
new tenant or tenants; and all reasonable expenses incurred by Landlord
in enforcing Landlord's remedies, including reasonable attorneys'
fees. Past due rent and other past due payments shall bear interest
from maturity at ten per cent (10%) per annum until paid.
F. In the event of termination or repossession of the
premises for an Event of Default, Landlord shall not have any
obligation to re-let or attempt to re-let the premises, or any portion
thereof, or to collect rental after re-letting; and in the event of
re-letting Landlord may re-let the whole or any portion of the premises
for any period, to any tenant, and for any use and purpose.
G. If Tenant should fail to make any payment or cure
any default hereunder within the time herein permitted, Landlord,
without being under any obligation to do so and without thereby waiving
such default, may make such payment and/or remedy such other default
for the account of Tenant (and enter the leased premises for such
purpose), and thereupon Tenant shall be obligated to, and hereby agrees
to pay Landlord, upon demand, all costs, expenses and disbursements
(including reasonable attorneys' fees) incurred by Landlord in taking
such remedial action.
H. In the event of any default by Landlord, Tenant's
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exclusive remedy shall be an action for damages (Tenant hereby waiving
the benefit of any laws granting it a lien upon the property of
Landlord and/or upon rent due Landlord), but prior to any such action
Tenant will give Landlord written notice specifying such default with
particularity, and Landlord shall thereupon have thirty (30) days in
which to cure any such default. Unless and until Landlord fails to so
cure any default after such notice, Tenant shall not have any remedy or
cause of action by reason thereof. All obligations of Landlord
hereunder will be construed as covenants, not conditions; and all such
obligations will be binding upon Landlord only during the period of its
possession of the building and not thereafter.
The term "Landlord" shall mean only the owner, for the
time being of the building, and in the event of the transfer by such
owner of its interest in the building, such owner shall thereupon be
released and discharged from all covenants and obligations of the
Landlord thereafter accruing, but such covenants and obligations shall
be binding during the lease term upon each new owner for the duration
of such owner's ownership.
LANDLORD'S
LIEN
20. In addition to any statutory lien for rent in
Landlord's favor, Landlord shall have and Tenant hereby grants to
Landlord a continuing security interest for all rentals and other sums
of money becoming due hereunder from Tenant, upon all goods, wares,
equipment, fixtures, furniture, inventory, accounts, contract rights,
chattel paper and other personal property of Tenant situated on the
premises, and such property shall not be removed therefrom without the
consent of Landlord until all arrearages in rent as well as any and all
other sums of money then due to Landlord hereunder shall first have
been paid and discharged. In the event of a default under this lease,
Landlord shall have, in addition to any other remedies herein or by
law, all rights and remedies under the Uniform Commercial Code,
including without limitation the right to sell the property described
in this Paragraph 20 at public or private sale upon five (5) days'
notice to Tenant. Tenant hereby agrees to execute such financing
statements and other instruments necessary or desirable in Landlord's
discretion to perfect the security interest hereby created. Any
statutory lien for rent is not hereby waived, the express contractual
lien herein granted being in addition and supplementary thereto.
MORTGAGES
21. Tenant accepts this lease subject and subordinate to
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any mortgage(s) and/or deed(s) of trust now or at any time hereafter
constituting a lien or charge upon the premises or the improvements
situated thereon. Tenant shall at any time hereafter on demand execute
any instruments, releases or other documents which may be required by
any mortgagee for the purpose of subjecting and subordinating this
lease to the lien of any such mortgage. However, Landlord shall use
best efforts to obtain from the holder of any such mortgage a
non-disturbance agreement by the terms of which said mortgage holder or
its successors or assigns shall recognize the rights of Tenant provided
that Tenant is not in default at such time and Tenant agrees to attorn
to said mortgage holder.
LANDLORD'S
DEFAULT
22. In the event Landlord should become in default in any
payments due on any such mortgage described in Paragraph 21 hereof or
in the payment of taxes or any other items which might become a lien
upon the premises and which Tenant is not obligated to pay under the
terms and provisions of this lease, Tenant is authorized and empowered
after giving Landlord five (5) days' prior written notice of such
default and Landlord fails to cure such default, to pay any such items
for and on behalf of Landlord, and the amount of any item so paid by
Tenant for or on behalf of Landlord together with any interest or
penalty required to be paid in connection therewith, shall be payable
on demand by Landlord to Tenant; provided, however, that Tenant shall
not be authorized and empowered to make any payment under the term of
this Paragraph 22, unless the item paid shall be superior to Tenant's
interest hereunder. In the event Tenant pays any mortgage debt in
full, in accordance with this paragraph, it shall, at its election, be
entitled to the mortgage security by assignment or subrogation.
MECHANIC'S
LIEN
23. Tenant shall have no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature
whatsoever upon or in any manner to bind the interest of Landlord in
the premises or to charge the rentals payable hereunder for any claim in
favor of any person dealing with Tenant, including those who may
furnish materials or perform labor for any construction or repairs, and
each such claim shall affect and each such lien shall attach to, if at
all, only the leasehold interest granted to Tenant by this instrument.
Tenant covenants and agrees that it will pay or cause to be paid all
sums legally due and payable by it on account of any labor performed or
materials furnished in connection with any work performed on the
premises on which any lien is or can be validly and legally asserted
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<PAGE> 44
against its leasehold interest in the premises or the improvements
thereon and that it will save and hold Landlord harmless from any and
all loss, cost or expense based on or arising out of asserted claims or
liens against the leasehold estate or against the rights, titles and
interest of the Landlord in the premises or under the terms of this
lease.
NOTICES
24. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with
reference to the sending, mailing or delivery of any notice or the
making of any payment by Landlord to Tenant or with reference to the
sending, mailing or delivery of any notice or the payment of any
payment by Tenant to Landlord shall be deemed to be complied with when
and if the following steps are taken:
A. All rent and other payments required to be made by
Tenant to Landlord hereunder shall be payable to Landlord at the
address hereinbelow set forth or at such other address as Landlord may
specify from time to time by written notice delivered in accordance
herewith.
B. All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address hereinbelow set
forth, or at such other address within the continental United States as
Tenant may specify from time to time by written notice
delivered in accordance herewith.
C. Any notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered whether actually
received or not when deposited in the United States Mail, postage
prepaid, Certified or Registered Mail, addressed to the parties hereto
at the respective addresses set out opposite their names below, or at
such other address as they have theretofore specified by written notice
delivered in accordance herewith:
Landlord: Tenant:
SOUTHWEST BUSINESS PROPERTIES, INC TELXON CORPORATION
1500 West Loop North, Suite 101 3330 West Market Street
Houston, Texas 77008 Akron, OHIO 44313-3352
If and when included within the term "Landlord", as used in this
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<PAGE> 45
instrument, there are more than one person, firm or corporation, all
shall jointly arrange among themselves for their joint execution of
such a notice specifying some individual at some specific address for
the receipt of notices and payments to Landlord; if and when included
within the term "Tenant", as used in this instrument, there are more
than one person, firm or corporation, all shall jointly arrange among
themselves for their joint execution of such a notice specifying some
individual at some specific address within the continental United
States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant" respectively, shall
be bound by notices given in accordance with the provisions of this
paragraph to the same effect as if each had received such notice.
MISCELLANEOUS
25. A. Words of any gender used in this lease shall be
held and construed to include any other gender, and words in the
singular number shall be held to include the plural, unless the context
otherwise requires.
B. The terms, provisions and covenants and
conditions contained in this lease shall apply to, inure to the benefit
of, and be binding upon, the parties hereto and upon their respective
heirs, legal representatives, successors and permitted assigns, except
as otherwise herein expressly provided.
C. The captions are inserted in this lease for convenience only and in
no way define, limit, or describe the scope or intent of this lease, or any
provision hereof, nor in any way affect the interpretation of this lease.
D. Tenant agrees, within ten (10) days after request of Landlord, to
deliver to Landlord, or Landlord's designee, an Estoppel Certificate stating
that this lease is in full force and effect, the date to which rent had been
paid, the unexpired term of this lease and such other matters pertaining to
this lease as may be reasonably requested by Landlord.
E. This lease may not be altered, change or amended except by an
instrument in writing signed by Landlord and Tenant.
SPECIAL PROVISIONS
26. See Exhibits "A", "B" and "C" attached hereto and made
part of this lease agreement.
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<PAGE> 46
EXECUTED the day of , 1991.
TELXON CORPORATION SOUTHWEST BUSINESS PROPERTIES
By By
TITLE TITLE
TENANT LANDLORD
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<PAGE> 47
EXHIBIT "C"
SPECIAL PROVISIONS
26.A.I. Pursuant to Paragraph 5B, 6, 7 and 13G of the Lease
Agreement, specific services, payment for utilities,
taxes, insurance and maintenance may be performed by
Landlord. The costs for these services, as defined
below, will be assessed to each individual Tenant on
a prorata basis. Tenant's prorata share shall be
determined by multiplying said costs by a fraction,
the numerator of which is the gross floor area of
the demised premises and the denominator of which is
the total gross floor area of the project of which
the premises form a part.
i. Maintenance, service and utilities for all
landscaping, planting areas and grounds as defined
in Exhibit "B".
ii. Maintenance, service and utilities for all outside
illumination for common parking areas, driveways and
service areas.
iii. Maintenance and charges for all water, sewer and
other utility services which are not directly
metered to Tenant but are metered to a master meter
designated for use by all of the Tenant.
iv. Security services, whether on a full-time or
part-time basis, should it become necessary to
engage this service for the benefit of the Tenants.
v. Any maintenance costs common to the Tenants.
These costs are due and payable in addition to the
monthly rental as stipulated in Paragraph 2.A of the
Lease. Landlord will accumulate the costs, as
defined above, for the items stipulated in the above
paragraphs and invoice for said services at
Landlord's discretion, but never less than once
yearly. Tenant shall pay to Landlord the amount of
said invoice upon receipt. This amount is in
addition to taxes, insurance and common
roadway/parking lot expenses which are escalated at
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<PAGE> 48
the end of each year as called for in Paragraphs 5B,
6, 7 and 13G.
A.II Pursuant to Paragraphs 6 & 7 of the Lease Agreement,
in the event during any calendar year any portion of
the building/project is unoccupied, these costs
shall be adjusted so as to reflect cost as though
fully occupied and Tenant shall pay his prorata
share of these costs, said prorata share shall be
based upon said costs so adjusted.
B. Rent Late Charges - Rent shall be considered to be
late if not paid by the 10th day of the month. A
late charge of ten percent (10%) per year shall be
charged for all overdue rent.
C. Locks - Should the Tenant desire to have locks to
the above referenced lease space changed, they
should notify the Landlord and Landlord will have
the locks changed at the Tenant's expense. If at
the expiration of this lease it is discovered that
the locks have been changed, Tenant shall be charged
the cost of converting said locks back to Landlord's
"Master Key System".
D. Air Conditioning System - Should the Leased Premises
contain existing air conditioning units, upon
Tenant's occupancy, said units shall be inspected
and put in proper operating condition. Tenant shall
be given a one month warranty from the date of
occupancy.
E. Rent - As specified in Paragraph 2 of this Lease.
F. Improvements - Taken "as is"
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<PAGE> 49
G. Renewal Option - Tenant shall have an option to
renew this lease for one additional five year term
at the then prevailing market rate for comparable
space in the West Loop market so long as tenant is
not in default of any terms, provisions, or
conditions of the lease. This option shall not
extend to any assignee of this lease without the
written consent of Landlord.
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<PAGE> 50
FIRST AMENDMENT TO THE LEASE AGREEMENT
STATE OF TEXAS
COUNTY OF HARRIS
This document shall serve to amend a certain Lease Agreement dated
approximately May 2, 1991, by and between Southwest Business Properties, Inc.
as "Landlord", and Telxon Corporation as "Tenant", for approximately 10,470
square feet of Office/Warehouse space located at 7280 Wynnwood, Suite 137,
Houston, Texas 77008; said Lease Agreement being for a primary term of twenty
four (24) months commencing approximately April 1, 1991 and scheduled to
terminate on March 31, 1993.
It is hereby agreed by all parties that the above referenced Lease
Agreement shall be amended as follows:
The term as referenced in Section 1. of the above referenced
Lease Agreement, shall be extended for One additional Thirteen
(13) month term, making the new expiration date, April 30,
1994.
Effective September 1, 1993, the Monthly Base Rent shall
increase by Eight Hundred Seven and 50/100 Dollars ($807.50)
to Four Thousand Thirty-Eight and 75/100 Dollars ($4,038.75)
in lieu of $3,231.00.
The Tenant shall be granted Three (3), One (1) Month Extension
to the Term of the above referenced Lease for the Period From
May 1, 1994 to July 30, 1994. Landlord must receive Thirty
(30) Days written notice from Tenant for each One (1) Month
extension.
Agreed and accepted this 4th day of May , 1993.
SOUTHWEST BUSINESS PROPERTIES, INC.
By:
Title:
TELXON CORPORATION
By:
Joyce J. George
Title: Vice President - Administration
<PAGE> 51
THIRD AMENDMENT TO THE LEASE AGREEMENT
STATE OF TEXAS
COUNTY OF HARRIS
This document shall serve to amend a certain Lease Agreement dated
approximately September 11, 1986, the first amendment to the Lease dated
September 11, 1986, and the Second Amendment to the Lease dated August 2, 1991,
by and between Southwest Business Properties, Inc. as "Landlord", and Telxon
Corporation as "Tenant", for approximately 40,800 square feet of
Office/Warehouse space located at 7280 Wynnwood, Suite 350, Houston, Texas
77008; said Lease Agreement being for a primary term of sixty (60) months
commencing approximately September 1, 1986 and scheduled to terminate on August
31, 1993.
It is hereby agreed by all parties that the above referenced Lease
Agreement shall be amended as follows:
The term as referenced in Section 1. of the above referenced
Lease Agreement, shall be extended for One additional Eight
(8) month term, making the new expiration date, April 30,
1994.
Effective September 1, 1993 the Monthly Base Rent shall
increase by Four Thousand Seventy-eight and 99/100 Dollars
($4,078.99) to Twenty Thousand, Three Hundred Ninety-Four and
94/100 Dollars ($20,394.94) in lieu of $16,315.95.
The tenant shall be granted Three (3), One (1) Month Extension
to the Term of the above referenced Lease for the Period From
May 1, 1994 to July 30, 1994. Landlord must receive Thirty
(30) Days written notice from Tenant for each One (1) Month
extension.
Agreed and accepted this 4th day of May , 1993.
SOUTHWEST BUSINESS PROPERTIES, INC.
By:
Title:
TELXON CORPORATION
By:
Joyce J. George
Title: Vice President - Administration
<PAGE> 52
SIXTH AMENDMENT TO THE LEASE AGREEMENT
STATE OF TEXAS
COUNTY OF HARRIS
This document shall serve to amend a certain Lease Agreement dated
approximately May 2, 1985, the First Amendment to the Lease dated September 11,
1986, the Second Amendment to the Lease dated August 15, 1988, the Third
Amendment to the Lease dated January 20,1989, and the Fourth Amendment to the
Lease dated August 1, 1991, the Fifth Amendment to the Lease dated March 23,
1992, by and between Southwest Business Properties, Inc. as "Landlord", and
Telxon Corporation as "Tenant", for approximately 22,460 square feet of
Office/Warehouse space located at 7280 Wynnwood, Suite 220 and Suite 101,
Houston, Texas 77008; said Lease Agreement being for a primary term of fifteen
(15) months commencing approximately June 1, 1985, as extended currently
scheduled to terminate on August 31, 1993.
It is hereby agreed by all parties that the above referenced Lease
Agreement shall be amended as follows:
The term as referenced in Section 1. of the above referenced
Lease Agreement, shall be extended for One additional Eight
(8) month term, making the new expiration date, April 30,
1994.
Effective September 1, 1993, the Monthly Base Rent shall
increase by Two Thousand Sixty-Eight and 75/100 Dollars
($2068.75) to Ten Thousand Three Hundred Forty-Three and
75/100 Dollars ($10,343.75) in lieu of $8,275.00.
The Tenant shall be granted Three (3), One Month Extension to
the Term of the above referenced Lease for the Period From May
1, 1994 to July 30, 1994. Landlord must receive Thirty (30)
Days written notice from Tenant for each One (1) Month
extension.
Agreed and accepted this 4th day of May , 1993.
SOUTHWEST BUSINESS PROPERTIES, INC.
By:
Title:
TELXON CORPORATION
By:
Joyce J. George
Title: Vice President - Administration
<PAGE> 1
Exhibit 10.3.1.a
FIRST AMENDMENT
TO
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT ("Amendment") is entered into as of March 30, 1994, by
and among TELXON CORPORATION, THE RETAIL TECHNOLOGY GROUP, INC.,
TELETRANSACTION CORP., ITRONIX CORPORATION, MICROOFFICE SYSTEMS TECHNOLOGY,
INC., and PTC AIRCO, INC. (jointly and severally, "Borrowers"), and THE BANK OF
NEW YORK COMMERCIAL CORPORATION, as Lender and as Agent (as such terms are
defined below).
BACKGROUND
----------
Borrowers have entered into a Revolving Credit, Term Loan and Security
Agreement dated as of October 20, 1993 with the various financial institutions
named therein or which hereafter become a party thereto (collectively,
"Lenders") and The Bank of New York Commercial Corporation, as agent for
Lenders ("Agent") (as amended, supplemented or otherwise modified from time to
time, the "Loan Agreement") pursuant to which certain financial accommodations
are provided to Borrowers.
Borrowers, Lenders and Agent anticipated that the Term Loan to be made under
the Loan Agreement would be made in installments upon completion of the various
structures being built on the Texas Real Property. Borrowers have requested
that Lenders and Agent amend the Loan Agreement to affect this understanding,
and Lenders and Agent are willing to do so on the terms and conditions
hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of Borrowers by Agent and
each Lender and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the conditions
precedent set forth in Section 3 below, the Loan Agreement is hereby amended as
follows:
(a) The following defined terms are hereby added in their appropriate
alphabetical order to Section 1.2 of the Loan Agreement:
<PAGE> 2
"METANETICS" shall mean Metanetics Corporation, a corporation organized
under the laws of the State of Delaware.
"PENRIGHT!" shall mean PenRight! Corporation, a corporation organized under
the laws of the State of Delaware.
(b) The definition of "AERONET" in Section 1.2 of the Loan Agreement is
hereby amended in its entirety to provide as follows:
"AIRONET" shall mean AIRONET Wireless Communications, Inc., a corporation
organized under the laws of the State of Delaware.
(c) The following defined terms in Section 1.2 of the Loan Agreement are
hereby amended in their entirety to provide as follows:
"GUARANTOR" shall mean the Foreign Subsidiary Guarantors, AIRONET, Telxon
Trading, Penright!, Metanetics and any other Person who executes a Guaranty.
"GUARANTOR SECURITY AGREEMENTS" shall mean individually and collectively,
each security agreement executed by Telxon Foreign, AIRONET, Telxon Trading,
Penright!, Metanetics and any other Subsidiary of Telxon in favor of Agent.
"REQUIRED LENDERS" means at any time Lenders holding Commitment Percentages
of at least Sixty-Six and Two-Thirds Percent (66 2/3%). In the event any
Lender fails to comply with its commitments hereunder (after the Agent shall
have given each non-defaulting Lender other than BNYCC the option (which must
be exercised within one (l) Business Day) to fund its pro rata share of the
amount not funded by any defaulting Lender or, in the event only one
non-defaulting Lender so opts to purchase the amount not funded by the
defaulting Lender, such Lender funds the entire defaulted amount), the
Commitment Percentages of all Lenders shall be recalculated for purposes of
this definition, so that the Commitment Percentage of any Lender is equal to a
percentage equivalent of a fraction of which the numerator is the outstanding
balance of Advances made by such Lender, including Letters of Credit and
Alternate Currency Advances which such Lender has an obligation to participate
in, and the denominator is the total outstanding principal balance of all
Advances.
"TERM LOAN EFFECTIVE DATE" shall mean for each installment of the Term Loan
the date all conditions precedent set forth in Sections 8.2 and 8.3 have been
satisfied or to the extent not satisfied, waived by Agent and Lenders.
-2-
<PAGE> 3
(d) Schedule 1.2 of the Loan Agreement is hereby amended by adding the
following language at the end thereof:
"7. The Lien by General Electric Capital Corporation against PTC on the
following equipment: One (1) 1979 Falcon 20F S/N 403, N#108BG with Two (2)
General Electric CF700-2DE Engines S/N's 304496B, 304495B with all attachments
and accessories."
(e) The following language is hereby added to the end of Section 2.4 of the
Loan Agreement:
"Notwithstanding any other provision of this Agreement, Lenders may fund a
portion of the Term Loan as each building upon the Texas Real Property is
completed. For purposes of this Agreement, any references to the Term Loan and
the Term Loan Effective Date shall be equally applicable to each funding of the
Term Loan. Section 8.3 shall be applicable to each and every funding of the
Term Loan. Each funding of the Term Loan shall be evidenced by a separate Term
Note. In no event shall the aggregate amount of the fundings of the Term Loan
exceed the Term Loan Amount. Lenders and/or Agent may request that any and all
Term Notes and other documents relating to the separate fundings of the Term
Loan be consolidated, and Borrowers agree to deliver such documentation that
Lenders or Agent reasonably deem necessary to effect such consolidation."
(f) Section 2.5 of the Loan Agreement is hereby amended in its entirety to
provide as follows:
"2.5 MAXIMUM ADVANCES. The aggregate balance of Advances outstanding at
any time shall not exceed the lesser of (a) Maximum Loan Amount or (b) the sum
of Formula Amount plus the outstanding principal balance of the Term Loan."
(g) The first sentence of Section 6.14 of the Loan Agreement is hereby
amended in its entirety to provide as follows:
"6.14. GUARANTEES. No later than April 8, 1994, deliver to Agent in form
and substance satisfactory to Lenders, (a) Guarantees duly executed by each of
Telesystems, Telxon Canada, Telxon UK, Telxon Foreign, Telxon Trading, AIRONET,
Penright! and Metanetics, (b) Guarantor Security Agreements duly executed by
each of Telxon Foreign, Telxon Trading, AIRONET, Penright! and Metanetics with
respect to all of the assets of Telxon Foreign, Telxon Trading, AIRONET,
Penright! and Metanetics and by Telesystems with respect to certain patents
owned by Telesystems, and (c) duly executed legal opinions which shall cover
such matters incident to the Guarantees and Guarantor Security Agreements
(other than those of Telxon Foreign) as Agent may reasonably require."
(h) Schedule 7.8 to the Loan Agreement is hereby amended by adding the
following language at the end thereof:
-3-
<PAGE> 4
"2. Promissory Note dated March ___, 1994 made by PTC in favor of General
Electric Capital Corporation in the amount of $2,100,000."
(i) The following language is hereby added to the Loan Agreement as Section
12.4:
"12.4. DTPA WAIVER. TO THE FULLEST EXTENT ALLOWED BY TEXAS LAW, BORROWERS
HEREBY WAIVE ALL PROVISIONS OF THE DECEPTIVE TRADE PRACTICES - CONSUMER
PROTECTION ACT ("DTPA"), OTHER THAN SECTION 17.555 (PERTAINING TO CONTRIBUTION
AND INDEMNITY) OF THE DTPA, WITH RESPECT TO OR CONCERNING THIS AGREEMENT, THE
MORTGAGES OR THE NOTE, OR THE TRANSACTIONS PURSUANT TO WHICH THEY ARE EXECUTED,
OR ANY TRANSACTIONS OR OTHER DEALINGS HERETOFORE, HEREAFTER OR
CONTEMPORANEOUSLY ARISING OR OCCURRING WITH RESPECT TO ANY OF THE FOREGOING,
AND TELXON EXPRESSLY WARRANTS AND REPRESENTS THAT IT HAS ASSETS OF $5,000,000
OR MORE AND EACH BORROWER EXPRESSLY WARRANTS AND REPRESENTS THAT IT (a) HAS
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO
EVALUATE THE MERITS AND RISKS OF THIS TRANSACTION, (b) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDERS OR AGENT AND
(c) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. BORROWERS AGREE THAT SUCH REPRESENTATIONS AND
WARRANTIES SHALL CONSTITUTE PRIMA FACIE EVIDENCE OF SUCH FACTS CONTAINED
THEREIN IN ANY LITIGATION WHEREIN THIS WAIVER IS ASSERTED."
3. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective as of
March 30, 1994, when and only when Agent shall have received four (4) copies of
this Amendment executed by Borrowers and such other certificates, instruments,
documents, agreements and opinions of counsel as may be required by Agent or
its counsel, each of which shall be in form and substance satisfactory to Agent
and its counsel.
4. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and
warrants as follows:
(a) This Amendment and the Loan Agreement, as amended hereby, constitute
legal, valid and binding obligations of each Borrower and are enforceable
against each Borrower in accordance with their respective terms.
(b) No Event of Default or Default has occurred and is continuing, or
would exist after giving effect to this Amendment.
(c) Each Borrower has no defense, counterclaim or offset with respect to
the Loan Agreement.
5. EFFECT ON THE LOAN AGREEMENT.
-4-
<PAGE> 5
(a) Upon the effectiveness of SECTION 2 hereof, each reference in the Loan
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like
import shall mean and be a reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan Agreement, and all other
documents, instruments and agreements executed and/or delivered in connection
therewith, shall remain in full force and effect, and are hereby ratified and
confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Agent or Lenders, nor
constitute a waiver of any provision of the Loan Agreement, or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.
6. EXPENSES. Each Borrower agrees that any expenses incurred by Agent
and/or Lenders in connection with any action taken by them under any Guaranty,
Guarantor Security Agreement, patent collateral security agreement, assignment
of security or any other agreement executed by any Guarantor shall constitute
Indebtedness of the Borrowers hereunder and shall be charged to the Borrowers'
account as Revolving Advances.
7. ADDITIONAL FINANCING. In the event that Borrowers obtain financing from
one or more lenders other than Lenders and such lenders desire to obtain a Lien
on the Texas Real Property, Borrowers shall execute and/or deliver prior to the
granting of such Lien any and all documents and agreements reasonably requested
by Agent and/or Lenders in order to protect their interests in the Collateral
(other than the Texas Real Property), including, but not limited to, mortgagee
waivers, subordination agreements and intercreditor agreements.
8. GOVERNING LAW. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.
9. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
10. COUNTERPARTS. This Amendment may be executed by the parties hereto in
one or more counterparts, each of which taken together shall be deemed to
constitute one and the same instrument.
-5-
<PAGE> 6
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first written above.
TELXON CORPORATION
By:_____________________________
Name:
Title:
3330 West Market Street
Akron, Ohio 44333
THE RETAIL TECHNOLOGY GROUP, INC.
By:________________________________
Name:
Title:
3330 West Market Street
Akron, Ohio 44333
TELETRANSACTION CORP.
By:________________________________
Name:
Title:
3330 West Market Street
Akron, Ohio 44333
ITRONIX CORPORATION
By:________________________________
Name:
Title:
South 801 Stevens
Spokane, WA 99204
MICROOFFICE SYSTEMS TECHNOLOGY, INC.
By:________________________________
Name:
Title:
3330 West Market Street
Akron, Ohio 44333
-6-
<PAGE> 7
PTC AIRCO, INC.
By:________________________________
Name:
Title:
3330 West Market Street
Akron, Ohio 44333
THE BANK OF NEW YORK COMMERCIAL
By:________________________________
Daniel J. Murray, Vice President
350 Fifth Avenue
New York, New York 10036
COMMITMENT PERCENTAGE: 100%
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, as Agent
By:________________________________
Daniel J. Murray, Vice President
-7-
<PAGE> 1
Exhibit 10.3.1.b
SECOND AMENDMENT
TO
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT ("Amendment") is entered into as of June 10,
1994, by and among TELXON CORPORATION, THE RETAIL TECHNOLOGY GROUP, INC.,
TELETRANSACTION CORP., ITRONIX CORPORATION, MICROOFFICE SYSTEMS TECHNOLOGY,
INC., and PTC AIRCO, INC. (jointly and severally, "Borrowers"), CONTINENTAL
BANK N.A. and THE BANK OF NEW YORK COMMERCIAL CORPORATION, each a Lender and
THE BANK OF NEW YORK COMMERCIAL CORPORATION as Agent (as such terms are defined
below).
BACKGROUND
----------
Borrowers have entered into a Revolving Credit, Term Loan and Security
Agreement dated as of October 20, 1993 with the various financial institutions
named therein or which hereafter become a party thereto (collectively,
"Lenders") and The Bank of New York Commercial Corporation, as agent for
Lenders ("Agent") (as amended, supplemented or otherwise modified from time to
time, the "Loan Agreement") pursuant to which certain financial accommodations
are provided to Borrowers.
Borrowers have requested that Lenders and Agent amend the Loan
Agreement to reflect the manner in which the Term Loan shall be borrowed by
Borrowers, and Lenders and Agent are willing to do so on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers by Agent
and each Lender and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined
herein shall have the meanings given to them in the Loan Agreement.
2. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction of the
conditions precedent set forth in Section 4 below, the Loan Agreement is hereby
amended as follows:
(a) Section 2.4 of the Loan Agreement is hereby amended in its
entirety to provide as follows:
"2.4 TERM LOAN. (a) Subject to the terms and conditions of
this Agreement, each Lender, severally and not jointly, will make the
Term Loan to Borrowers in a principal amount equal to such Lender's
Commitment Percentage of the Term Loan Amount. The Term Loan
<PAGE> 2
shall be funded in two installments. The initial installment shall be
in the amount of $1,425,000. The second installment shall be in an
amount equal to the lesser of (x) $4,075,000, or (y) the difference
between (i) the Term Loan Amount and (ii) $1,425,000.
(b) The initial installment of the Term Loan shall be
advanced on or about June 10, 1994. Until the second installment of
the Term Loan is funded, the Term Loan shall be, with respect to
principal, payable commencing on the first day of July, 1994, and on
the first day of each month thereafter, in monthly principal
installments each in an amount equal to $23,750.00.
(c) The second installment of the Term Loan shall be
advanced upon satisfaction of the conditions set forth in Sections 8.2
and 8.3 hereof. The Term Loan shall be, with respect to principal,
payable commencing on the first day of the month following the month
in which the second installment of the Term Loan is advanced and on
the first day of each month thereafter, in monthly principal
installments each in an amount equal to one-sixtieth (1/60) of the
Term Loan Amount.
(d) Notwithstanding anything to the contrary in
subsections (b) and (c) of this Section 2.4, the unpaid principal
balance of the Term Loan shall be due on the fifth anniversary of the
date on which the initial installment of the Term Loan was made,
subject to acceleration upon the occurrence of an Event of Default
(and the expiration of any applicable cure periods) under this
Agreement or the termination of this Agreement.
(e) The Term Loan shall be evidenced by and subject to
the terms and conditions set forth in the secured promissory note
("Term Note") substantially in the form attached hereto as Exhibit
2.4."
(b) Section 8.3 of the Loan Agreement is hereby amended in its
entirety to provide as follows:
"8.3 CONDITIONS TO TERM LOAN. The agreement of Lenders to
fund the second installment of the Term Loan is subject to the
satisfaction of the following conditions precedent:
(a) SURVEY. Agent shall have received in form
and substance satisfactory to Agent an updated survey of the Texas
Real Property reflecting the completion of all improvements on the
Texas Real Property.
-2-
<PAGE> 3
(b) APPRAISALS. Agent shall have received appraisals of
all improvements on the Texas Real Property conducted by independent
third parties who are satisfactory to Agent and which appraisals
comply in all respects with the Financial Institutions Reform Recovery
and Enforcement Act and are satisfactory to Agent in all respects;
(c) COMPLIANCE. Agent shall have received with respect to
the improvements upon the Texas Real Property (i) evidence of zoning
compliance and (ii) certificates of occupancy; and
(d) UK GUARANTY. Agent shall have received the
Guaranty of Telxon UK in form and substance satisfactory to Agent."
3. CONDITIONS OF EFFECTIVENESS. This Second Amendment shall
become effective when and only when Agent shall have received (a) four (4)
copies of this Second Amendment executed by Borrowers and Continental Bank
N.A.; (b) an executed Deed of Trust, Assignment of Rents and Security Agreement
from Telxon Corporation to Jim Kletke, Esq., as Trustee for the benefit of
Agent on the Texas Real Property (the "Deed"); (c) an executed Term Note; (d) a
fully paid mortgagee title insurance policy (or binding commitment to issue a
title insurance policy, marked to Agent's satisfaction to evidence the form of
such policy to be delivered with respect to the Deed, in standard ALTA form
with respect to the Texas Real Property and issued by a title insurance company
satisfactory to Agent, in an amount equal to $5,500,000, insuring the Deed
creates a valid Lien on the Texas Real Property with no exceptions which Agent
shall not have approved in writing and no survey exceptions; and (e) Agent
shall have received the executed legal opinion of local counsel to Borrowers in
Texas in form and substance acceptable to Agent and its counsel which shall
cover such matters incident to the transactions contemplated by the Deed as
Agent and its counsel may reasonable require.
4. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby
represents and warrants as follows:
(a) This Second Amendment and the Loan Agreement, as
amended hereby, constitute legal, valid and binding obligations of
each Borrower and are enforceable against each Borrower in accordance
with their respective terms.
(b) No Event of Default or Default has occurred and is
continuing, or would exist after giving effect to this Second
Amendment.
(c) Each Borrower has no defense, counterclaim or offset
with respect to the Loan Agreement.
-3-
<PAGE> 4
5. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of SECTION 2 hereof, each reference in
the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or
words of like import shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended herein, the Loan Agreement, and
all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Second
Amendment shall not operate as a waiver of any right, power or remedy of Agent
or Lenders, nor constitute a waiver of any provision of the Loan Agreement, or
any other documents, instruments or agreements executed and/or delivered under
or in connection therewith.
6. RELEASE. The parties hereto acknowledge that the Deed may be
released in accordance with Section 5.19 of the Deed. The parties further
acknowledge that any prepayment of the Term Loan in connection with a
refinancing solely of the Term Loan shall not result in any early termination
fee under Section 13.1 of the Loan Agreement.
7. GOVERNING LAW. This Second Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns and shall be governed by and construed in accordance with the laws
of the State of New York.
8. HEADINGS. Section headings in this Second Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Second Amendment for any other purpose.
9. COUNTERPARTS. This Second Amendment may be executed by the
parties hereto in one or more counterparts, each of which taken together shall
be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, this Second Amendment has been duly executed as of
the day and year first written above.
TELXON CORPORATION
By: /s/ Dan R. Wipff
------------------------------
Dan R. Wipff, President
3330 West Market Street
Akron, Ohio 44333
(SIGNATURES CONTINUED ON NEXT PAGE)
-4-
<PAGE> 5
THE RETAIL TECHNOLOGY GROUP, INC.
By: /s/ Fred L. Graf
------------------------------
Fred L. Graf, Treasurer
3330 West Market Street
Akron, Ohio 44333
TELETRANSACTION CORP.
By: /s/ Dan R. Wipff
------------------------------
Dan R. Wipff, President
3330 West Market Street
Akron, Ohio 44333
ITRONIX CORPORATION
By: /s/ Lawrence L. Allman
------------------------------
Title: President & CEO
---------------------------
South 801 Stevens
Spokane, WA 99204
MICROOFFICE SYSTEMS TECHNOLOGY, INC.
By: /s/ Dan R. Wipff
------------------------------
Dan R. Wipff, President
3330 West Market Street
Akron, Ohio 44333
PTC AIRCO, INC.
By: /s/ Dan R. Wipff
------------------------------
Dan R. Wipff, President
3330 West Market Street
Akron, Ohio 44333
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, as Lender and as Agent
By: /s/ Daniel J. Murray
------------------------------
Daniel J. Murray, Vice President
350 Fifth Avenue
New York, New York 10036
COMMITMENT PERCENTAGE: 50%
CONTINENTAL BANK, N.A.
By: /s/ Jerome P. Sepich
------------------------------
Jerome P. Sepich, Vice President
231 S. LaSalle Street
Chicago, IL 60697
COMMITMENT PERCENTAGE: 50%
-5-
<PAGE> 1
Exhibit 11
EXHIBIT (11)* TO REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED MARCH 31, 1994
TELXON CORPORATION
COMPUTATION OF COMMON SHARES OUTSTANDING
AND EARNINGS PER SHARE
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- ---------
<S> <C> <C> <C>
Net income (loss) applicable to common
shares $(2,799) $(12,064) $16,989
======= ======== =======
Weighted average common shares outstand-
ing for the year 15,425 14,696 14,067
Increase in weighted average from:
Dilutive effect of stock options 110 -- 62
------- -------- --------
Weighted average common shares, assuming
issuance of the above securities $15,535 $ 14,696 $14,129
======= ======== ========
Earnings (loss) per common share:
On the weighted average common
shares outstanding for the year $ (.18) $ (.82) $ 1.21
Assuming issuance of shares for
dilutive stock options** $ (.18) $ (.82) $ 1.20
</TABLE>
* Numbered in accordance with Item 601 of Regulation S-K.
** This calculation is submitted in accordance with Regulation S-K Item
601(b)(1) although not required for income statement presentation because it
results in dilution of less than three percent. The Company's 7-1/2%
Convertible Debentures were omitted from the fully diluted calculation due to
their anti-dilutive effect.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
- ----------- -----------------------------
<S> <C>
Telxon Australia Pty. Ltd. Australia
N.V. Telxon Belgium S.A. Belgium
Telxon France S.A. France
Telxon Italia s.r.l. Italy
Telxon mde GmbH Germany
Telxon Limited England
Telxon Japan Japan
Telxon Canada Corporation, Ltd. Ontario, Canada
MicroOffice Systems Technology, Inc. Delaware
Telxon Europe BV The Netherlands
Telxon Data Systems AG Switzerland
Itronix Corporation Washington
Telxon Foreign Sales Corp. U.S. Virgin Islands
New England Data Systems, Inc. Delaware
PTC Airco, Inc. Delaware
Retail Technology Group, Inc. Delaware
Teletransaction, Inc. Delaware
Telesystems SLW Inc. Ontario, Canada
AIRONET Wireless Communications, Inc. Delaware
Aironet Canada, Inc. Ontario, Canada
PenRight! Corporation Delaware
Telxon Trading Co. Delaware
Telxon Corporation Systems Espana, S.A. Spain
Metanetics Corporation, Inc. Delaware
</TABLE>
<PAGE> 1
Exhibit 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus constituting
part of this Registration Statement of Telxon Corporation and Subsidiaries on
Form S-8 (Nos. 2-88298, 2-92434, 33-16939, 33-989, 33-32600, 33-37177,
33-43314, 33-43315, 33-60968, 33-60970 and 33-60972) of our report, which
includes an explanatory paragraph related to a Consolidated Class Action, dated
June 27, 1994, on our audits of the consolidated financial statements and
financial statement schedules of Telxon Corporation and Subsidiaries, as of
March 31, 1994 and 1993, and for each of the three years in the period ended
March 31, 1994, appearing on page 28 of the Form 10-K. We also consent to the
reference to us under "Selected Financial Data" appearing on page 17 of the
Form 10-K.
COOPERS & LYBRAND
Akron, Ohio
June 27, 1994
<PAGE> 1
EXHIBIT 25
POWER OF ATTORNEY
-----------------
TELXON CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Telxon Corporation, a Delaware corporation (the "Company"), does hereby make,
constitute and appoint Robert F. Meyerson, Dan R. Wipff, Gerald J. Gabriel and
Fred L. Graf, and each of them acting individually, his true and lawful
attorney-in-fact and agent with power to act without the other and full power
of substitution and resubstitution, to execute, deliver and file, for and on
his behalf, and in his name and in his capacity as aforesaid, any and all
instruments which said attorneys-in-fact and agents, or any of them, may deem
necessary to enable the Company to comply with the Securities Exchange Act of
1934, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with the filing with the Securities and
Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994, together with any amendments and any other documents
in support thereof or supplemental thereto, hereby granting to said
attorneys-in-fact and agents and each of them full power and authority to do
and perform each and every act and thing whatsoever as said attorneys-in-fact
and agents may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the capacity as
aforesaid, hereby ratifying and confirming all acts and things which said
attorneys-in-fact and agents may do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 24th day of June, 1994.
/s/ J. ROBERT ANDERSON
-----------------------------
J. Robert Anderson, Director
<PAGE> 2
POWER OF ATTORNEY
-----------------
TELXON CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Telxon Corporation, a Delaware corporation (the "Company"), does hereby make,
constitute and appoint Robert F. Meyerson, Dan R. Wipff, Gerald J. Gabriel and
Fred L. Graf, and each of them acting individually, his true and lawful
attorney-in-fact and agent with power to act without the other and full power
of substitution and resubstitution, to execute, deliver and file, for and on
his behalf, and in his name and in his capacity as aforesaid, any and all
instruments which said attorneys-in-fact and agents, or any of them, may deem
necessary to enable the Company to comply with the Securities Exchange Act of
1934, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with the filing with the Securities and
Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994, together with any amendments and any other documents
in support thereof or supplemental thereto, hereby granting to said
attorneys-in-fact and agents and each of them full power and authority to do
and perform each and every act and thing whatsoever as said attorneys-in-fact
and agents may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the capacity as
aforesaid, hereby ratifying and confirming all acts and things which said
attorneys-in-fact and agents may do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 24th day of June, 1994.
/s/ ROBERT A. GOODMAN
------------------------------
Robert A. Goodman, Director
<PAGE> 3
POWER OF ATTORNEY
-----------------
TELXON CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and
director of Telxon Corporation, a Delaware corporation (the "Company"), does
hereby make, constitute and appoint Robert F. Meyerson, Dan R. Wipff, Gerald J.
Gabriel and Fred L. Graf, and each of them acting individually, his true and
lawful attorney-in-fact and agent with power to act without the other and full
power of substitution and resubstitution, to execute, deliver and file, for and
on his behalf, and in his name and in his capacity as aforesaid, any and all
instruments which said attorneys-in-fact and agents, or any of them, may deem
necessary to enable the Company to comply with the Securities Exchange Act of
1934, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with the filing with the Securities and
Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994, together with any amendments and any other documents
in support thereof or supplemental thereto, hereby granting to said
attorneys-in-fact and agents and each of them full power and authority to do
and perform each and every act and thing whatsoever as said attorneys-in-fact
and agents may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the capacity as
aforesaid, hereby ratifying and confirming all acts and things which said
attorneys-in-fact and agents may do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 24th day of June, 1994.
/s/ ROBERT F. MEYERSON
-----------------------------
Robert F. Myerson
Chief Executive Officer,
Chairman and Director
<PAGE> 4
POWER OF ATTORNEY
-----------------
TELXON CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Telxon Corporation, a Delaware corporation (the "Company"), does hereby make,
constitute and appoint Robert F. Meyerson, Dan R. Wipff, Gerald J. Gabriel and
Fred L. Graf, and each of them acting individually, his true and lawful
attorney-in-fact and agent with power to act without the other and full power
of substitution and resubstitution, to execute, deliver and file, for and on
his behalf, and in his name and in his capacity as aforesaid, any and all
instruments which said attorneys-in-fact and agents, or any of them, may deem
necessary to enable the Company to comply with the Securities Exchange Act of
1934, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with the filing with the Securities and
Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994, together with any amendments and any other documents
in support thereof or supplemental thereto, hereby granting to said
attorneys-in-fact and agents and each of them full power and authority to do
and perform each and every act and thing whatsoever as said attorneys-in-fact
and agents may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the capacity as
aforesaid, hereby ratifying and confirming all acts and things which said
attorneys-in-fact and agents may do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 23rd day of June, 1994.
/s/ RAJ REDDY
-----------------------------
Raj Reddy, Director
<PAGE> 5
POWER OF ATTORNEY
-----------------
TELXON CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Telxon Corporation, a Delaware corporation (the "Company"), does hereby make,
constitute and appoint Robert F. Meyerson, Dan R. Wipff, Gerald J. Gabriel and
Fred L. Graf, and each of them acting individually, his true and lawful
attorney-in-fact and agent with power to act without the other and full power
of substitution and resubstitution, to execute, deliver and file, for and on
his behalf, and in his name and in his capacity as aforesaid, any and all
instruments which said attorneys-in-fact and agents, or any of them, may deem
necessary to enable the Company to comply with the Securities Exchange Act of
1934, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with the filing with the Securities and
Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994, together with any amendments and any other documents
in support thereof or supplemental thereto, hereby granting to said
attorneys-in-fact and agents and each of them full power and authority to do
and perform each and every act and thing whatsoever as said attorneys-in-fact
and agents may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the capacity as
aforesaid, hereby ratifying and confirming all acts and things which said
attorneys-in-fact and agents may do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 28th day of June, 1994.
/s/ NORTON. W ROSE
-----------------------------
Norton W. Rose, Director
<PAGE> 6
POWER OF ATTORNEY
-----------------
TELXON CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Telxon Corporation, a Delaware corporation (the "Company"), does hereby make,
constitute and appoint Robert F. Meyerson, Dan R. Wipff, Gerald J. Gabriel and
Fred L. Graf, and each of them acting individually, his true and lawful
attorney-in-fact and agent with power to act without the other and full power
of substitution and resubstitution, to execute, deliver and file, for and on
his behalf, and in his name and in his capacity as aforesaid, any and all
instruments which said attorneys-in-fact and agents, or any of them, may deem
necessary to enable the Company to comply with the Securities Exchange Act of
1934, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with the filing with the Securities and
Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994, together with any amendments and any other documents
in support thereof or supplemental thereto, hereby granting to said
attorneys-in-fact and agents and each of them full power and authority to do
and perform each and every act and thing whatsoever as said attorneys-in-fact
and agents may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the capacity as
aforesaid, hereby ratifying and confirming all acts and things which said
attorneys-in-fact and agents may do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 24th day of June, 1994.
/s/ WALTER J. SALMON
---------------------------
Walter J. Salmon, Director
<PAGE> 7
POWER OF ATTORNEY
-----------------
TELXON CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and
director of Telxon Corporation, a Delaware corporation (the "Company"), does
hereby make, constitute and appoint Robert F. Meyerson, Gerald J. Gabriel and
Fred L. Graf, and each of them acting individually, his true and lawful
attorney-in-fact and agent with power to act without the other and full power
of substitution and resubstitution, to execute, deliver and file, for and on
his behalf, and in his name and in his capacity as aforesaid, any and all
instruments which said attorneys-in-fact and agents, or any of them, may deem
necessary to enable the Company to comply with the Securities Exchange Act of
1934, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with the filing with the Securities and
Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994, together with any amendments and any other documents
in support thereof or supplemental thereto, hereby granting to said
attorneys-in-fact and agents and each of them full power and authority to do
and perform each and every act and thing whatsoever as said attorneys-in-fact
and agents may deem necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or in the capacity as
aforesaid, hereby ratifying and confirming all acts and things which said
attorneys-in-fact and agents may do or cause to be done by virtue of these
presents.
IN WITNESS WHEREOF, the undersigned has subscribed these presents,
effective as of the 24th day of June, 1994.
/s/ DAN R. WIPFF
--------------------------
Dan R. Wipff,
Chief Operating Officer,
President and Director
